Annual Report film - The KCP Limited :: Celebrating 75 … KCP LTD. . 4 Annual Report 2006 NOTICE is hereby given that the Sixty Fifth Annual General Meeting of the Shareholders of

1Annual Report 2006

CONTENTS

Board of Directors …………………………………………………………......... 03

Notice to Shareholders ……………………………………………………........ 04

At a Glance …………………………………………………………………........ 10

Report of the Directors ……………………………………………………........ 11

Report on Corporate Governance ………………………………………........ 19

Auditors' Report ……………………………………………………………........ 24

Balance Sheet . ……………………………………………………………........ 27

Profit and Loss Account …………………………………………………......... 28

Schedules ……………………………………………………………………....... 29

Statement of Significant Accounting Policies ……………………………..... 38

Notes forming part of the Accounts …………………………………............ 40

Cash Flow Statement ……………………………………………………......... 48

Balance Sheet Abstract and Company's

General Business Profile …………………………..…………………….......... 49

Subsidiary Companies Statement 50

Consolidated Financial Statements of

The KCP Limited Group ……………………………………………............ 52

Page No.

THE KCP LTD. .

2 Annual Report 2006

HIGHLIGHTS

31-3-97** 31-3-98 31-3-99 31-3-00 31-3-01 31-3-02 31-3-03 31-3-04 31-3-05 31-3-06

SHARE CAPITAL 1289 1289 1289 1289 1289 1289 1289 1289 1289 1289

RESERVES & SURPLUS 9035 9425 9399 8329 8740 8435 8112 8084 8610 9625

NET WORTH 10324 10714 10688 9618 10029 9725 9401 9374 9899 10914

FIXED ASSETS (NET) 5292 6628 9357 9316 8686 8146 7556 7091 6850 7572

GROSS INCOME 21941 15466 19235 13957 13954 14092 14353 14722 16863 20680

GROSS PROFIT 7176 1702 2039 1139 2544 2734 1122 1385 2445 3448

DEPRECIATION 360 356 419 618 701 695 688 667 494 519

INTEREST 487 590 1152 1480 1255 1051 774 584 489 444

PROFIT BEFORE TAX 6328 756 468 -959 587 988 -339 135 1462 2485

PROFIT AFTER TAX 5478 656 318 -962 567 790 -178 117 967 1750

EARNINGS PER SHARE (Rs.) 42.49 5.09 2.47 - 4.40 6.13 -1.38 0.91 7.50 13.57

BOOK VALUE PER SHARE (Rs.) 80.08 83.11 82.91 74.61 77.79 75.43 72.93 72.71 76.79 84.66

DIVIDENDS ON EQUITY (%) 25 25 25 10 11 20 10 10 30 50

DEBT EQUITY RATIO 0.32 0.51 0.48 0.43 0.35 0.23 0.13 0.05 0.03 0.39

Year Ended

(Rs. in Lakhs)

** After Re-Organisation

3Annual Report 2006

DIRECTORS

DUTT V.L.

Chairman & Managing Director

INDIRA DUTT V.L.

Joint Managing Director

KAVITHA D. CHITTURI

Executive Director

PINNAMANENI KOTESWARA RAO

NANDAGOPAL S.

RAMAKRISHNA A.

RAMAKRISHNAN P.R.

RAMAKRISHNAN V.H.

SWAMINATHA REDDY O.

GANDHI V.

COMPANY SECRETARY &CHIEF FINANCIAL OFFICER

SRIDHAR K.

AUDITORSM/s. BRAHMAYYA & CO.

Chartered Accountants, Vijayawada

COST AUDITORSM/s. PARANKUSAM & CO., Hyderabad

BANKERSSTATE BANK OF INDIA

CANARA BANK

SOUTH INDIAN BANK

REGISTERED AND CORPORATE OFFICE"RAMAKRISHNA BUILDINGS"

2, Dr. P.V.CHERIAN CRESCENTEGMORE, CHENNAI - 600 008PH: 66772600 Fax : 66772620 E-MAIL : [email protected]

REGISTRARS & SHARE TRANSFERS AGENT& DEPOSITORY REGISTRARS

M/s. INTEGRATED ENTERPRISES (INDIA) LIMITED

II FLOOR, "KENCES TOWERS"NO.1, RAMAKRISHNA STREETNORTH USMAN ROAD, T.NAGARCHENNAI - 600 017Ph: 28140801 to 803 Fax : 28142479Website : www.iepindia.com

THE KCP LTD. .


NOTICE is hereby given that the Sixty Fifth Annual General

Meeting of the Shareholders of the Company will be held on

Wednesday, the 27th September, 2006 at 11.00 A.M. at the

Registered Office of the Company at "Ramakrishna Buildings",

No. 2, Dr. P.V. Cherian Crescent, Egmore, Chennai-600 008 to

transact the following business :

ORDINARY BUSINESS

1. To receive, consider and adopt the Directors' Report, the

accounts of the Company for the year ended 31st March,

2006 and the Auditors' Report thereon.

2. To declare a dividend.

3. To appoint a Director in the place of Sri. O. Swaminatha

Reddy, who retires by rotation and being eligible for

re-appointment and to consider and if thought fit, to pass

the following resolution as an Ordinary Resolution.

"RESOLVED that Sri. O. Swaminatha Reddy who retires

by rotation be and is hereby re-appointed as a Director of

the Company liable to retire by rotation."

4 To appoint a Director in the place of Smt. Kavitha D

Chitturi, who retires by rotation and being eligible for

re-appointment and to consider and if thought fit, to pass

the following resolution as an Ordinary Resolution.

"RESOLVED that Smt. Kavitha D Chitturi, who retires by

rotation, be and is hereby re-appointed as a Director of

the Company not liable to retire by rotation."

5. To appoint a Director in the place of Sri. Pinnamaneni

Koteswara Rao, who retires by rotation and being eligible

for re-appointment and to consider and if thought fit, to

pass the following resolution as an Ordinary Resolution.

"RESOLVED that Sri Pinnamaneni Koteswara Rao, who

retires by rotation, be and is hereby re-appointed as a

Director of the Company liable to retire by rotation."

6. To appoint auditors for the current financial year and to

authorize the Board of Directors to fix their remuneration.

M/s. Brahmayya & Co., Chartered Accountants,

Vijayawada, retire at this Annual General Meeting and are

eligible for re-appointment, and to pass the following

resolution as Special Resolution.

"RESOLVED that M/s. Brahmayya & Co., Chartered

Accountants, Vijayawada be and are hereby appointed

as the Auditors of the Company to hold such office until

the conclusion of the next Annual General Meeting at a

remuneration to be fixed by the Board on mutually agreed

terms."

SPECIAL BUSINESS

7. To appoint Sri. V. Gandhi as a Director of the Company

and to consider and if thought fit, to pass with or without

the modification, the following resolution as an Ordinary

Resolution.

"RESOLVED that Sri. V. Gandhi be and is hereby

appointed as a Director of the Company liable to retire by

rotation."

8. To appoint Dr. V.L. Dutt as Chairman and Managing

Director for a period of five years from 01.07.2006 to

30.06.2011, and to consider and if thought fit, to pass

with or without modification the following resolution as an

Ordinary Resolution:

"RESOLVED that in accordance with the provisions of

Sections 198, 269 (read with Schedule XIII) 309, 310 and

other applicable provisions of the Companies Act, 1956

and subject to necessary approvals, Dr. V.L. Dutt be and

is hereby appointed as the Chairman & Managing

Director of the Company for a period of five years with

effect from 1st July, 2006."

"Further RESOLVED that the following remuneration, be

approved as payable to the Chairman and Managing

Director during his tenure in office, for five years

commencing 1st July, 2006."

NOTICE TO SHAREHOLDERS

5Annual Report 2006

9. To appoint Smt. V L Indira Dutt as Joint Managing Director for a period of five years with effect from 01.07.2006 to

30.06.2011, and to consider and if thought fit, to pass with or without modification the following resolution as an Ordinary

Resolution:

"RESOLVED that in accordance with the provisions of Sections 198, 269 (read with Schedule XIII) 309, 310 and other

applicable provisions of the Companies Act, 1956 and subject to necessary approvals, Smt. V.L. Indira Dutt be and is hereby

appointed as Joint Managing Director of the Company for a period of five years with effect from 1st July, 2006."

"Further, RESOLVED that the following remuneration, be approved as payable to the Joint Managing Director during her

tenure in office, for five years commencing 1st July, 2006."

I. SALARY : Rs.1,00,000 per month

II. PERQUISITES

1. Medical Reimbursement : Rs.25,000 per annum or Rs.1,25,000 in a block of five years,

for self and family.

2. Club Fees : Two clubs

I SALARY : 1,40,000 per month

II PERQUISITES

1. Housing : Free furnished accommodation




4. Personal Accident Insurance : As per Company Rules.

5. Car and Telephone : Will be provided also with one or more cars, and one or more

telephones at his residence or such other places as

necessary for use in connection with the Company's

business.

III COMMISSION : Remuneration by way of commission on net profits in addition

to salary and perquisites is also payable. The amount of

salary, perquisites and commission, in aggregate is subject to

an overall ceiling of 2.5% of the net profits of the Company in

a financial year, computed in accordance with the provisions

of Sec. 349 of the Companies Act, 1956.

IV MINIMUM REMUNERATION : Where in any financial year during the currency of the tenure

of the Chairman & Managing Director, the Company has no

profits or its profits computed in accordance with Section 349

of the Companies Act, 1956, are inadequate, the Company

will pay him remuneration by way of salary and perquisites as

specified above.

THE KCP LTD. .



4. Provident Fund Superannuation : 12% of salary as Provident Fund contribution

Fund/Annuity Fund : 15% of salary as Superannuation contribution

5. Gratuity : In accordance with Payment of Gratuity Act, read with

Company Rules.


telephones at her residence or such other places as


business.




an overall ceiling of 2.5% of the net profits of the Company in

a financial year, computed in accordance with the provisions

of Sec. 349 of the Companies Act, 1956.


of the Joint Managing Director, the Company has no profits or

its profits computed in accordance with Section 349 of the

Companies Act, 1956 are inadequate, the Company will pay

her remuneration by way of salary and perquisites as

specified above.

10. To consider, and if thought fit, to pass with or without modification, the following resolution as an Ordinary Resolution:

"RESOLVED that in accordance with the provisions of Section 198, 269 (read with Schedule XIII) 309, 310 and other

applicable provisions of the Companies Act, 1956 and subject to necessary approvals, the following revised remuneration,

be approved for payment to the Executive Director, Smt. Kavitha D Chitturi during the remaining tenure of her office, from

1st January, 2006 to 30th September, 2009."

I SALARY : Rs.75,000 per month, in the scale Rs.75000 - Rs.5000 -

Rs.100000.

II PERQUISITES

1. Housing : HRA Rs.25,000 per month





5. Provident Fund Superannuation : 12% of salary as Provident Fund contribution



Company Rules.

7Annual Report 2006


telephones at her residence or such other places as


business.




an overall ceiling of 1% of the net profits of the Company in a

financial year, computed in accordance with the provisions of

Sec. 349 of the Companies Act, 1956.


of the Executive Director, the Company has no profits or its

profits computed in accordance with Section 349 of the

Companies Act 1956 are inadequate, the Company will pay

her remuneration by way of salary and perquisites as

specified above.

11. To appoint Sri. V. Gandhi as Technical Director of the Company for a period of five years and to consider and if thought fit,

to pass with or without modification, the following resolution as an Ordinary Resolution.

"RESOLVED that Sri V. Gandhi be and is hereby appointed as Technical Director of the Company for a period of five years

commencing from 25th January 2006, on the following terms:

I SALARY Rs.75,000 per month in the scale Rs.75000 - Rs.5000 -

Rs.100000.

II PERQUISITES

1. Housing : Free furnished accommodation and Rs.25,000 per month as

house related expenses.

2. Medical Reimbursement : Rs.15,000 per annum, or Rs.75,000 in a block of five years,


3. Leave Travel Concession : Rs.15,000 per annum

4. Club Fees : One club


6. Provident Fund Superannuation : 12% of salary as Provident fund contribution



Company Rules.

8. Encashment of Leave : Accumulated leave can be encashed at the end of

contract period.


telephones at his residence or such other places as


business.

THE KCP LTD. .


III COMMISSION Remuneration by way of commission on net profits in addition



an overall ceiling of 1% of the net profits of the Company in a

financial year, computed in accordance with the provisions of

Sec. 349 of the Companies Act, 1956.

IV MINIMUM REMUNERATION Where in any financial year during the currency of the tenure

of the Technical Director, the Company has no profits or its

profits computed in accordance with Section 349 of the

Companies Act, 1956 are inadequate, the Company will pay

him remuneration by way of salary and perquisites as

specified above.

( FOR AND ON BEHALF OF THE BOARD )

For THE K C P LIMITED

V. L. DUTT

Chairman & Managing DirectorPlace : Chennai-600 008Date : 26th June, 2006

NOTES :

1. ANY MEMBER ENTITLED TO ATTEND AND VOTE IS

ENTITLED TO APPOINT A PROXY TO ATTEND AND

VOTE INSTEAD OF HIMSELF. A PROXY NEED NOT

BE A MEMBER. THE PROXY FORM DULY

COMPLETED MUST BE RETURNED SO AS TO

REACH THE REGISTERED OFFICE OF THE

COMPANY NOT LESS THAN 48 HOURS BEFORE THE

TIME OF THE COMMENCEMENT OF THE AFORESAID

MEETING.

2. Explanatory Statement under Section 173 of the

Companies Act, 1956 is annexed herewith.

3. Shareholders are requested to notify their change of

address, if any, without delay. Members holding shares in

physical form should mention in all correspondence the

ledger folio number. Persons holding in Demat form

should inform their Depository Participant.

4. A brief profile of the Directors retiring by rotation and

eligible for re-appointment, as required by Clause 49 (VI)

(A) of the Listing Agreements signed by the Company with

the Stock Exchanges, is given as Item No. 13 in the

Directors' Report forming part of the Annual Report.

5. Shareholders are requested to bring with them their

copies of the Annual Report. Due to the prohibitive costs

of printing, it will not be possible to supply extra copies.

6. The Register of Members and the Register of Share

Transfer will remain closed from 19th September, 2006 to

27th September, 2006, both days inclusive.

7. Members who wish to have their dividend warrant printed

with the bank account for direct credit may please forward

a mandate for payment of dividend, to avoid loss during

postal transit or interception and encashment by

unscrupulous persons.

8. The Company has already transferred the unclaimed

Dividend, up to the financial year ended 31st March 1998

to the Investor Education and Protection Fund as per

Section 205(A)(5).

9. Members who have not encashed their dividend warrants

pertaining to 1999 and after may approach the

Company's Registered Office at No. 2, Dr. P.V. Cherian

Crescent, Egmore, Chennai - 600 008.

9Annual Report 2006

10. Additional information pursuant to Clause 49 of the Listing

Agreement with Stock Exchange on Director’s re-

appointment/appointment at this Annual General Meeting

is appearing in this Directors’ Report.

EXPLANATORY STATEMENT ANNEXED

TO THE NOTICE

Explanatory Statement annexed pursuant to Section

173(2) of The Companies Act, 1956.

ITEM NO. 6 :

Banks & Financial Institutions hold more than 25% of the

subscribed and paid-up share capital of the Company, mainly

by way of shares held as security. In terms of clarification of the

Department of Company Affairs in this regard, it is necessary

to pass a Special Resolution to appoint auditors in terms of

Section 224A of The Companies Act, 1956. Accordingly a

Special Resolution is tabled for consideration.

The Board recommends this resolution for your approval.

None of the Directors of the Company is interested in this

Resolution.

ITEM NO. 7 :

Sri. V. Gandhi was appointed as Additional Director in the

Board Meeting held on 25.01.2006 pursuant to Section 260 of

the Companies Act, 1956.

He will hold office till this Annual General Meeting and hence

the resolution for his appointment as Director.

Due notice under Section 257 of the Companies Act, 1956 has

been received from a member proposing the appointment of

Sri. V. Gandhi as Director of the Company.


Except Sri. V. Gandhi, none of the other Directors of the

Company is interested in this resolution.

ITEM NO. 8:

Dr. V L Dutt is appointed, subject to necessary approvals, as

Chairman and Managing Director for a period of five years

from 01.07.2006 to 30.06.2011, in the Board Meeting held on

25.01.2006 on the remuneration as recommended by the

Remuneration Committee. Due to the dynamism and guidance

of Dr. V L Dutt, the Company has gained and maintained the

momentum in the Business and has greater vision for the

years to come. Hence it is proposed that Dr. V L Dutt be

appointed as Chairman and Managing Director on the Board

for a period of five years on the terms as mentioned in the

Resolution.


Except Dr. V. L Dutt, Smt. V.L. Indira Dutt, Smt. Kavitha D.

Chitturi, none of the other Directors is interested in this

resolution recommended.

ITEM NO. 9 :

Smt V.L. Indira Dutt is appointed, subject to necessary

approvals, as Joint Managing Director for a period of five years

from 01.07.2006 to 30.06.2011, in the Board Meeting held on

25.01.2006 on the remuneration as recommended by the

Remuneration Committee. She is controlling and guiding the

activities of the Cement Division of the Company and has

greater vision for the years to come. Hence it is proposed that

Smt V L Indira Dutt be appointed as Joint Managing Director

on the Board for a period of five years on the terms as

mentioned in the Resolution recommended.


Except Dr. V.L. Dutt, Smt. V.L. Indira Dutt, Smt. Kavitha D


resolution.

ITEM NO. 10 :

Smt Kavitha D Chitturi is appointed as Executive Director from

1st October 2004 and to keep in line with the market position,

and subject to necessary approvals, it is desired to revise the

remuneration payable to Smt. Kavitha D Chitturi. She is

managing the Engineering Unit of the Company and is

involved in K C P Biotech Limited plant also. Hence it is

proposed to revise the remuneration payable to Smt. Kavitha

D Chitturi as mentioned in the Resolution recommended.


Except Dr. V.L. Dutt, Smt. V.L. Indira Dutt, and Smt. Kavitha D


resolution.

THE KCP LTD. .


ITEM NO. 11:

Sri. V. Gandhi aged about 56 years is a part of the senior

management of the Company with 31 years of experience. He

is a metallurgist by profession. After serving in KCP Engineering

Unit as Foundry Manager, he took up an assignment as a

Project Co-ordinator for rehabilitation of Engineering Unit,

having similar functions to our unit, for 4 years, in Uganda,

funded by multilateral funding agencies. He served as General

Manager in FCB-KCP, looking after planning and procurement.

He was Chief Executive of the Engineering Unit of the Company

immediately before being appointed as Technical Director. He

has effectively improved the performance of the unit and has

broad based the product range. The Company will benefit from

having his services at the Board level. Hence he was appointed

as Additional Director in the Board of the Company. Since he

was appointed only as Additional Director, he will hold office

only till the conclusion of the the forthcoming Annual General

Meeting and he needs to be appointed into the Board in the

forthcoming Annual General Meeting. Hence, it is proposed that

AT A GLANCE

31.03.2006 31.03.2005

Cement Produced (M.T.) 5,31,504 4,84,551

Power Produced (KWH) 3,68,21,869 2,37,10,176

TURNOVER: Rs. % Rs. %

(000') (000')Machinery & Equipment 8,02,252 40.69 6,69,452 40.85Cement 10,91,751 55.37 9,21,352 56.22Others 77,588 3.94 48,125 2.94

19,71,591 100 16,38,929 100

FIXED ASSETS Rs. Rs.(000') (000')

Gross Block 17,24,324 16,94,150Depreciation 10,34,474 10,16,110Net 6,89,850 6,78,040RESERVES 9,62,511 8,61,048

PROFITS 3,00,379 1,95,561

(Before Depreciation and Taxation)

NET PROFIT 1,74,965 96,753(After Depreciation and Tax,available for appropriation & Dividend)

Sri. V. Gandhi be appointed as Technical Director on the

Board for a period of five years on the terms and conditions

as mentioned in the Resolution recommended.


Except Sri. V. Gandhi, none of the other Directors of the

Company is interested in this Resolution.

FOR AND ON BEHALF OF THE BOARD

For THE K.C.P. LIMITED

V.L. DUTT

Chairman & Managing Director

Place : Chennai-600 008

Date : 26th June, 2006

11Annual Report 2006

REPORT OF THE DIRECTORS FOR THE YEAR ENDED 31st MARCH, 2006

3. DIVIDENDS

Your Directors are pleased to recommend for the

approval of the shareholders a Dividend of 50% (Rs.

5.00 per share) on 12892116 Equity Shares of Rs. 10/-

each amounting to Rs. 64460580.

4. CAPITAL & RESERVES

Capital of the Company stood at Rs.12,89,21,160 and

the Reserves stood at Rs.96,25,11,433 as on 31st

March, 2006.

5. FIXED DEPOSITS

As at 31st March, 2006, there were deposits matured

and unclaimed amounting to Rs.52,43,000 of 262

depositors. Since then, Rs.12,16,000 of 40 depositors

were renewed and Rs.8,60,000 of 42 depositors were

repaid.

Realisation during the last quarter of the year under review

was much better than the previous quarters in view of the

good increase in the demand and better prices. In the first

three quarters, prices were not remunerative which resulted

in this segment posting losses. Subsequent quarter

witnessed substantial increase in prices. For the year as a

whole, this segment posted a net loss of Rs.216 lakhs as

compared to net profit of Rs.566 lakhs for the previous year.

Overview :

The Company operates a plant of 500000 tonnes annual

capacity at Macherla in Guntur District of Andhra Pradesh.

During the year under report, the Company marketed

cement in Andhra Pradesh, Pondicherry and parts of Tamil

Nadu & Karnataka. The Company's prospects were in tune

with the realisation in Andhra Pradesh since 90% of the

production was marketed in Andhra Pradesh.

State of the Industry :

The entire country is witnessing increase in Demand.

Demand outstripped supplies in the entire country, as also

in Andhra Pradesh, in the last quarter of this year. The

Company's production capacity is 4% of the total production

capacity available in the State. Severe competition and un

Submitted to the Shareholders at the 65th Annual General Meeting held

at the Registered Office of the Company

on Wednesday, the 27th September, 2006 at 11.00 a.m.

1. Your Directors have pleasure in submitting their reportfor the financial year ended 31st March, 2006 togetherwith the Balance Sheet on that date and the Profit andLoss Account for the year ended on that date.

2. PROFIT & APPROPRIATIONS

Rs. Rs.

The accompanying accounts

show a Net Profit of 17,49,64,633

for the year 2005-2006

after providing for

Interest of ……………………4,43,85,574

Depreciation of ..……………. 5,18,68,661

Reversal of Deferred Tax ...... 2,26,23,19 Provision for Current Tax of....7,65,00,000

Fringe Benefit Tax of ……….. 50,00,000

Deduct:

Transfer to General Reserve 12,50,00,000

Proposed Dividend and Tax thereon 7,35,01,176

Balance to be carried to the next year 50,95,20,289

6. MANAGEMENT DISCUSSION & ANALYSIS

SALES & PROFITS

(Rs. in lakhs)

FINANCIAL YEAR 2005-2006 2004-2005

Sales 19716 16389

Profit before Interest & Tax 2764 1951

Profit(+)/Loss(-) after tax 1733 968

Current ratio 2.09 1.95

Debt Equity ratio 0.39 0.03

Inventory Turnover 3.85 4.33

CEMENT

Operational Performance :

(Rs. in lakhs)

FINANCIAL YEAR 2005-2006 2004-2005

Cement produced (M.T.) 531504 484551

Capacity Utilisation (%) 106% 96%

Cement sold 529877 487015

Turnover (Rs. In lakhs) 10918 9214

Segment Result 92 566

THE KCP LTD. .


remunerative prices had impacted in the first three

quarters. However, prices firmed up in the last quarter as

mentioned above.

Increase in transport costs due to oil price increase and

consequent increase in input costs, have had adverse

impact on the segment result.

Outlook :

The Company produced 50% Portland Cement and 50%

Blended Cement during the year. The Company proposes

to produce predominantly Portland Cement in the ensuing

year.

Demand for Cement increased substantially during the

fourth quarter of the year and thereafter. Hence prices are

expected to firm up and rule at higher levels as compared to

previous year all through the Country.

The Company was able to procure required coal

domestically thereby avoiding incurring heavy costs on

import of coal.

The Company is in the final stages of installing a waste heat

recovery system, at a cost of Rs.1150 lakhs, which is

expected to generate 2MW electricity. In furtherance of

clean environment, a clinker silo is being built at a cost of

Rs.1000 lakhs, which is also in the final stages of

completion. These facilities are expected to be operational

in the second/third quarter of fiscal year 2006-2007.

POWER


(Rs. in lakhs)

FINANCIAL YEAR 2005-2006 2004-2005

Hydel power

generation in (KWH) 33183700 23710170

Usage (KWH) 27102046 22568453

Turnover (Rs. in lakhs) 882 790

Segment result 540 377

Generating stations operated to capacity since adequate

water flow was available. Wind power generation yielded a

generation of 3670434 units.

Overview :

The Company has five mini-hydel units aggregating to 8.25

MW capacity on the Guntur Branch Canal of the Nagarjuna

Sagar Dam. This being an irrigation canal, water is

expected to be available for seven to eight months of the

year. Electricity generated in these units is wheeled to the

Company's cement unit for use. Generation in excess of

the consumption at the cement unit is banked on a monthly

basis and is to be used within twelve months of generation.

Electricity unused even after twelve months is sold to the

Grid. Electricity used in the cement factory will be deducted

from the monthly bills and will get a relief at the H.T rates,

while electricity sold to grid will be paid for at the prevalent

purchase price as determined by APERC.

In addition to the Hydel Unit, the 12 wind turbines of 225 KW

each, taken on operating lease, newly set up last year by

Indusind bank, and maintained by Alfin Wind Energy

Limited, which is located at Thandayarkulam Village,

Radhapuram Taluk, Tirunelveli District of Tamil Nadu is

producing adequate units as envisaged. The Company has

entered into agreement with Tamil Nadu Electricity Board,

as operating lessee, to wheel the energy generated to the

Company's Engineering Unit located in Tiruvottiyur. Power

remaining unused as at 31st March of each year is sold to

TNEB at the prevalent purchase price.

Risks :

Except one scheme all the other four are operating at FULL

capacity due to good inflow of water. Further, water flow in

the canal is unpredictable which is entirely dependant on

inflow of water to Nagarjuna Sagar Dam. Normal monsoon

during the season improved storage in Nagarjuna Sagar

Dam. Consequently, during the year under report,

adequate flow of water was available in the canal.

Generation was normal.

Concerns :

The following matters taken to Court by the Company are

still pending in appropriate Courts:

a) Increase in wheeling charge - challenged by the

Company, in AP High Court. The Court quashed the

order. APTRANSCO went on appeal to Supreme

Court, which is pending.

b) Increase in water cess - challenged by the Company

and is pending in AP High Court.

c) Government levied a duty on electricity generated,

which was also contested by the Company and is

pending in AP High Court. APERC has, for the current

year fixed wheeling charge of 6% and cash

compensation of 84.25 paise per KW per month. The

Company has contested this hike also in the AP High

Court, which is pending.


Outlook :

Prospects of this unit are dependent on copious monsoon

resulting in abundant water flow to Nagarjuna Sagar Dam.

Electricity reform measures are expected to tone down the

concessions available to all developers including mini-hydel

units. This will reduce the expected benefit out of captive

generation of Hydel Power.

ENGINEERING


(Rs. in lakhs)

FINANCIAL YEAR 2005-2006 2004-2005

Turnover :

Domestic 8611 6301

Export 167 875

Segment result 2143 1251

The Company operates a versatile engineering facility that

is capable of manufacturing heavy mechanical equipment to

a given design for various industries. The workshop has

foundry, heavy fabrication and machine shop facilities,

integrated within the plant location. Arakonam facility was

effectively used to augment production of foundry products.

Due to all round growth in the Cement, Sugar and

Infrastructure sectors, the operation of the Engineering Unit

at Tiruvottiyur was substantially better than the previous

year in terms of turnover and profits.

Overview :

Status of capital goods sector :

During the year capital goods industry has maintained

momentum and is doing well on both domestic and export

market.

Opportunities :

Widening of the product range has also widened the

customer base. This is leading to better value addition.

Risks :

Product mix and customer mix are the deciding factors

affecting the performance of this segment which are

variables with shorter time cycle. Consequently, this

segment results are open to variations in profits as each

job order will have differing contributions.

Outlook :

With the orders on hand of about Rs. 100 Crores and the

existing product-mix, performance during fiscal 2006-2007

is expected to yield similar results as that of the year under

report. The modernisation programme being implemented

at a cost of Rs.2000 lakhs will enable the Company to

increase productivity and to compete in higher value added

segment.

7. CORPORATE INVESTMENTS

Performance :

Fives Cail K.C.P. Limited :

Operations during the year ended 31.03.2006 were better

than the previous year. New domestic orders fructified on

revival of sugar industry. The Company returned profits in

the current year and was able to wipe out accumulated

losses. Outlook for the ensuing year is optimistic. The

Company has declared a dividend of 50% for the year

ended 31.03.2006.

Sudalagunta Sugars Limited:

Our Investment in Sudalagunta Sugars Limited has come

down below 20% and hence the financial results are not

discussed here.

K.C.P. Biotech Limited :

During the year under report, paprica (chilli) colour extract

was exported to USA, Europe, South Africa and Japan.

Quality of the products has been acceptable to the

international buyers. Natural colour market demand being

vast, growth potential offered by this business is impressive.

However, production process is under stabilization and the

Company is focusing to get quality manpower to improve

the efficiency of the Plant. Efforts are on to improve yields,

which is essential to make this business segment profitable.

For the year under report this unit posted a loss of

Rs. 279 lakhs.

Diminution in value of investments :

As per the audited accounts of KCP Biotech Ltd, the

Company has incurred cash losses during the year, and is

more than 50% of its networth. The Directors are of the

opinion that since this being the first full year of operations,

THE KCP LTD. .


and the production process is being stabilized, there need

not be any adjustment towards diminutions of investment in

the books of ‘The KCP Ltd’.

KCP Vietnam Industries Limited :

KCP Vietnam Industries Limited concluded the season with

a crush of 303321 tonnes and a recovery of 9.64%.

Realisation in 2005 was higher than that of the previous

year. For the year ended 31-12-2005, the Company earned

a profit of Rs. 853 lakhs. Accumulated losses have been

brought down to Rs.420 lakhs. Dong Xuan Factory crushed

7432 tonnes of cane and the syrup was taken into

production process at the Phu Yen factory.

KECEPE Investments (Pte) Limited :

The process of winding up of the investment Company,

(KECEPE Investments (Pte) Limited) in Singapore, through

which investment was made in the Vietnam Subsidiary has

been completed.

Overview :

Status and risks :

Investment in Sugar :

Prospects of the parent Company's investment in Vietnam

improved substantially, with the excellent demand for the

sugar in Vietnam and this trend is likely to continue for the

coming year also. During the year under review, this

company posted profits.

Investment in Bio-Technology:

Natural colour extraction facility became fully operational

during the year. Further, production process is yet to

stabilise. While there is a good demand for the products,

and quality has been established to international

requirements, returns depend upon appropriate

manufacturing process. Directors are confident that this will

be achieved during the course of ensuing financial year.

8. CAUTIONARY STATEMENT

Statements in the "Management Discussion and Analysis"

describing the Company's objectives, expectations or

predictions are as perceived currently. Actual results may

differ materially from those expressed in the statement.

Important factors that could influence the Company's

operations include: domestic supply and demand conditions

affecting selling prices of finished goods, input prices,

changes in government regulations, tax laws, economic

developments within the country and other factors such as

litigation and industrial relations.

9. SAFETY & POLLUTION CONTROL

Cement and Engineering units had necessary approvals

under pollution control and the emission / effluent levels

conformed to requirements.

10. CONSERVATION OF ENERGY,

TECHNOLOGY ABSORPTION, EXPORT AND

FOREIGN EXCHANGE EARNINGS

AND OUTGO

A statement giving the details of conservation of energy,

technology absorption, export and foreign exchange earned

and outgo in accordance with the Companies (Disclosure of

particulars in the report of Board of Directors), Rules, 1988

is enclosed.

11. SUBSIDIARIES

In terms of application under Section 212(8) of the

Companies Act, 1956, application submitted to Central

Government, a copy of the Balance Sheet, Profit and Loss

Account, Report of the Board of Directors and the Report of

the Auditors of the above Subsidiary Companies have not

been attached with the Balance Sheet of the Company. The

Company will make available these documents/details upon

request by any member of the Company interested in

obtaining the same.

However, as required under the listing Agreements with the

Stock Exchanges, the Consolidated Financial Statements of

the Company and all its Subsidiaries as prepared in

accordance with Indian GAAP is enclosed and forms part of

the Annual Report and Accounts.

12. DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Clause 2(AA) of Section 217 of the Companies

Act, 1956, Board of Directors hereby states -

1) that in the presentation of annual accounts, applicable

Accounting Standards have been followed and there is

no material departure;

2) that the Directors have selected such Accounting

Policies and applied them consistently and made

judgements and estimates that are reasonable and

prudent so as to give a true and fair view of the state

of affairs of the Company, as at 31st March, 2006 and

profit of the Company for the year ended 31st March,

2006;

3) that the Directors have taken proper and sufficient care


for the maintenance of adequate accounting records in

accordance with the provisions of the Act for

safeguarding the assets of the Company and for

preventing and detecting fraud and other irregularities;

4) that the Directors have prepared the annual accounts

on a 'going-concern' basis.

13. DIRECTORS

M/s. O. Swaminatha Reddy, Kavitha D Chitturi,

Pinnamaneni Koteswara Rao retire by rotation at the

forthcoming Annual General Meeting and being

eligible, offer themselves for re-appointment. Details

of Sri.O. Swaminatha Reddy, Smt. Kavitha D Chitturi

and Sri. Pinnamaneni Koteswara Rao, whose

reappointments are coming up for consideration at the

AGM, are given below :

PROFILE OF EACH DIRECTOR :

a) O. Swaminatha Reddy

Sri. O Swaminatha Reddy, a Chartered Accountant by

profession and has vast banking and industrial

experience of over 50 years. He held various high

ranking posts which include Chairman - Andhra Bank,

Chairman & Managing Director - Andhra Pradesh State

Financial Corporation. In addition to the directorship

of the Company, he holds the following positions :

1. M/s. Sagar Cements Ltd - Chairman

2. M/s. Swan Vacum Systems Ltd - Chairman

3. M/s. TCI Finance Ltd - Chairman

4. M/s. Sujana Resorts Ltd - Chairman

5. M/s. Sagar Power Ltd - Chairman

6. M/s. VBC Industries Ltd - Director

7. M/s. Transport Corporation of India Ltd - Director

8. M/s. Surana Telecom - Director

9. M/s. Bhagyanagar Metals Ltd - Director

10. M/s. Khaitan Tiberwal Electricals Ltd - Director

11. M/s. HBC Flex Tech Ltd - Director

12. M/s. KM Power Ltd - Director (Nominee of IREDA).

13. M/s. EPR Pharmaceuticals P Ltd - Director

Other Corporate Bodies :

1. Indian Institute of Economics, Hyderabad - Chairman-Governing Body.

2. Federation of AP Chamber of Commerce & Industry -Member-Management Committee (Ex-officio).

Committees :

1. M/s. Sagar Cements Ltd - Chairman Audit Sub Committee

2. M/s. Transport Corporation of India- Chairman Audit Sub Committee

3. M/s. Khaitan Tiberwal Elec. Ltd - ChairmanAudit Sub Committee

4. M/s. Bhagyanagar Metals Ltd - ChairmanAudit Sub Committee

5. M/s. Surana Telecom Ltd - ChairmanAudit Sub Committee

6. M/s. VBC Industries Ltd - Member Audit Sub Committee

b) Kavitha D Chitturi :

Smt. Kavitha Dutt Chitturi is a graduate in Business

Management with specialization in International Business

from Cedar Crest College Allentown, Pennsylvania. She

also holds a Post-Graduate Diploma in Human Resources.

She is presently a Member of Madras Chapter of Young

Presidents Organisation, an International Organisation

based at USA and Secretary of Madras Chapter FICCI

Ladies Organisation. She was appointed as Executive

Director of the Company from 1/10/2004 for a period of five

years.

In addition to the directorship of the Company she holds the

following positions :

1. M/s. KCP Biotech Ltd - Director

2. M/s. Ramakrishna Sons P Ltd - Director

c) Pinnamaneni Koteswara Rao :

Sri. Pinnamaneni Koteswara Rao, is an agriculturist and

served as Zilla Parishad Chairman in Krishna district of

Andhra Pradesh. He joined the Board in January, 1976.

In addition to the directorship in the company, he holds the

following positions :

1. M/s. Veeraiah Non-conventional Power Projects

Limited - Director

d) Appointment of Technical Director:

In the Board Meeting held on 25th Januray 2006,

Sri .V. Gandhi was appointed as Additional Director on the

Board. Sri . V. Gandhi aged about 56 years is a part of the

senior management of the Company with 31 years of

THE KCP LTD. .


experience. He is a Metallurgist by profession. After serving

in KCP Engineering Unit as Foundry Manager, he took up

an assignment as a Project Co - ordinator for rehabilitation

of Engineering Unit, having similar functions to our unit, for

4 years, in Uganda, funded by multilateral funding agencies.

He served as General Manager in FCBKCP, looking after

planning and procurement. He was appointed as Technical

Director into the Board of the Company from 25.01.2006.

He has effectively improved the performance of the Unit and

has broad based the product range. Your Directors are of

the opinion that the Company will benefit from having his

services at the Board level.

In addition to the directorship of the Company, he does not

hold any other position in any other Company.

e) Re - appointment of Dr. V.L. Dutt as Chairman and

Managing Director for a period of five years from

01.07.2006 to 30.06.2011.

Dr. V.L. Dutt is managing and running the affairs of the

Company successfully for the last 3 decades and has

great vision for the Company and your Board feels it is

essential that he be continued as Chairman and

Managing Director of the Company further and in the

Board Meeting held on 25.01.2006, Dr. V.L. Dutt has

been re-appointed, for a further period of five years,

effective 01.07.2006.

In addition to the Directorship of the Company, heholds the following positions:

1. M/s. Fives Cail KCP Ltd - Chairman

2. M/s. KCP Biotech Ltd - Director

3. M/s. KCP Vietnam Industries Ltd - Chairman

4. M/s. Chennai Willingdon Corporate Foundation - Chairman

5. M/s. DCM Shriram Fertilizers Ltd - Director

6. M/s. Velagapudi Foundation - Director

7. M/s. V Ramakrishna Sons P Ltd - Director

f) Re-appointment of Smt. V.L. Indira Dutt as JointManaging Director for a period of five Years from01.07.2006 to 30.06.2011.

Smt. V.L. Indira Dutt is successfully managing the affairs of

the Company and your Board feels that it is essential that

she be re appointed as Joint Managing Director of the

Company for further period of five years from 1.7.2006.

In addition to the directorship in the company, she holds the

following positions:

1. M/s. Fives Cail - KCP Limtied - Director

2. M/s. Velagapudi Foundation - Director

3. M/s. KCP Vietnam Industries Limited - Director

4. M/s. KCP Technologies Limited - Director

5. M/s. KCP Biotech Limited - Director

6. M/s. V Ramakrishna Sons Private Limited - Director

14. MANAGEMENT STAFF

The Company employs 375 officers.

List of employees in receipt of remuneration higher than the

limit prescribed in Section 217(2A) of The Companies Act,

1956, is enclosed to the report.

15. STAFF RELATIONS

The Company employs 526 workers and 72 staff members.

Industrial relations remained cordial.

16. AUDITORS

M/s. Brahmayya & Co., Chartered Accountants, Vijayawada

retire at the conclusion of this Annual General Meeting and

are eligible for re-appointment.

M/s. Parankusam & Company, Hyderabad are the Cost

Auditors of the Company to conduct the cost audit for the

Cement and Hydel Units for the year ending 31st March,

2007.

17. INTERNAL CONTROL SYSTEMS AND

THEIR ADEQUACY

The Internal Audit department prepares at the beginning ofthe year a detailed audit plan covering the various units ofthe company and conducts as per the plan and a detailedreport is prepared and reviewed. In line with the practices,


planning and conduct of the internal audit is orientedtowards a review of controls in the management of risks,along with the maintenance of proper accounting recordsand the reliability of financial information used in thebusiness.

The Internal Audit department reports significant auditobservations, on a quarterly basis, to the Audit Committee.During the year the Committee met 4 times to review theaudit report submitted along with the review of periodicalfinancial statements. The Statutory auditors of theCompany also attend and participate in the audit committeemeetings to convey their views to the Audit Committee onthe adequacy of internal control systems in the Company.

18. CORPORATE GOVERNANCE

The Company has complied with all mandatory provisions

of Corporate Governance as prescribed under the Listing

Agreement of the Stock Exchange with which the Company

is registered.

A separate report on Corporate Governance is annexed as

a part of the Annual Report along with the Auditors'

statement on its compliance.

19. DEPOSITORY SYSTEM

The Company has arranged with the National Securities

Depository Limited (NSDL) as well as the Central

Depository Services (India) Limited (CDSL) to enable

shareholders to hold shares in a dematerialised form. The

Company also offers simultaneous demateralizsation of the

physical shares lodged for transfer.

20. CONSOLIDATED FINANCIAL STATEMENTS

As stipulated by Clause 32 of The Listing Agreement,

Consolidated Financial Statements have been prepared by

the Company in accordance with the requirements of

Accounting Standard 21 - 'Consolidated Financial

Statements' issued by the Institute of Chartered

Accountants of India. The audited Consolidated Financial

Statements form part of the Annual Report.

21. ACKNOWLEDGEMENT

The Board wishes to thank the bankers for their continued

and positive support. The Board also places on record their

appreciation of the work done by all the employees of the

Company.

(FOR AND ON BEHALF OF THE BOARD)

For The KCP Ltd.

V.L. DUTT

Chairman &

Managing Director

Place : Chennai-600 008

Date : 26h June, 2006

Statement showing particulars of employees of the

Company as required under Section 217 (2A) of the

Companies Act,1956, read with the

Companies(Particulars of Employees) Rules,1975 and

forming part of the Report of the Board of Directors for

the year ended 31st March,2006.

Particulars given below are in the following sequence :

Sl. No, Name, Designation, Qualification, Experience, Date

of commencement of employment, Salary in Rs.

Commission in Rs, Benefits in Rs, Total remuneration in Rs.

Nature of Employment, Date of Birth, Particulars of previous

employment :- name of the employer, designation and

period of employment.

1. Dr. V.L. Dutt, Chairman and Managing Director,

Grad.B.I.M,48Years,3.4.1970, 3,20,079, 62,73,914,

15291, 66,09,284, contractual, 27/12/1937,

V.Ramakrishna Sons (Private) Limited, Administrative

Director,12 years.

2. Smt. V.L. Indira Dutt, Joint Managing Director, B.A., 20

years, 1.7.1996, 6,29,683, 59,79,601, Nil, 66,09,284,

contractual, 14/9/1940.

3. Smt. Kavitha Dutt Chitturi, Executive Director,

Graduate in Business Management, PDGHR, 9 years,

1.10.1999, 8,78,899, 17,64,815, 60,448, 26,43,714,

contractual, 17.05.1971.

4. Sri. V. Gandhi, Technical Director, B. E (Met.), 30

years, 25.01.2006, .2,67,652, 2,10,389, Nil, 4,78,041,

contractual, 4.3.1949, Fives Cail KCP Ltd, GM (PPC),

7 years.

THE KCP LTD. .


ANNEXURE

FORM A (See Rule 2)

FORM OF DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY

CEMENT PRODUCTION UNIT, MACHERLA

CURRENT YEAR PREVIOUS YEAR

POWER AND FUEL CONSUMPTON 2005-2006 2004-2005

1. ELECTRICITY

A). PURCHASED FROM APSEB

Unit (K.W.H) 20142386 17880847

Total Amount (Rs.) 83292031 79126897

Rate/Unit (Rs.) 4.14 4.43

B). OWN GENERATION

I) THROUGH DIESEL GENERATOR

Unit (K.W.H) 217888 171490

Units per Ltr.of Diesel Oil 3.47 3.78

Cost/Unit (Rs.) 21.62 18.77

2) THROUGH HYDEL POWER

Unit (K.W.H) 26223399 21790750

Total Amount (Rs.) 85318376 76267625

Cost/Unit (Rs.) 3.25 3.50

2. COAL( SPECIFY QUANTITY AND

WHERE USED)

Qty (Tonnes) 86995 76011

Total cost (Rs.) 215747241 159932247

Average rate (Rs.) 2480.00 2104.07

3. DIESEL OIL

Qty ( Ltrs ) 5000 4014

Total cost (Rs.) 156808 104206

Average Rate (Rs.) 31.36 25.96

4. CONSUMPTION PER UNIT OF

PRODUCTION

Electricity (KWH) 85.06 82.56

Furnace Oil.

Coal 0.156 0.160

FORM B (See Rule 2)

Form of disclosure of particulars with respect to TECHNOLOGY ABSORPTION

1. EXPENDITURE ON RESEARCH AND DEVELOPMENT

(a) Capital - -

(b) Recurring 253477 619421

(c) Total 253477 619421

(d) Percentage of R&D Expenses on Total Turnover 0.012% 0.037%

2. TECHNOLOGY ABSORPTION

The Company continues to utilise the in-house R&D facilities

3. FOREIGN EXCHANGE EARNINGS AND OUTGO

Total Foreign Exchange Used 28404037 20227531

Total Foreign Exchange Earned 34447880 107845078


REPORT ON CORPORATE GOVERNANCE

The Company believes that

• Effective Corporate Governance is an essentialcomponent of a successful enterprise in a globalisedeconomy.

• Value addition through wider consultations andcompliance of standards, sharpens the organisationalskill to achieve results better than before.

• Appropriate disclosures to shareholders ensureadequate information to assess and match risk of andreward from the enterprise.

• Consequently, Corporate Governance delivers acohesive group of shareholders who cherish similarvalues, share similar perspectives and expect similarreturns.

The Company makes disclosures of its operations and

performance to public through the Annual Report, quarterly

financial results, its website (www.kcp.co.in), timely press

releases and Electronic Data Information Filing And

Retrieval Systems (EDIFAR). The Company has

implemented the mandatory requirements of the 'Code of

Governance' as mentioned in Clause 49 of the Listing

Agreement.

The report on corporate governance is divided into five

parts:

I. Board of Directors

II. Remuneration of Directors

III. Committees of the Board

IV. Shareholder information

V. Other disclosures

Directors No. of Attendance Number No. of other No. of

Board at last of other Board shares

Meetings AGM Directorships Committees held by

attended (16-9-2005) in which non-

during Director is Executive

the year a member Directors

Non-Executive Independent Directors:

Sri. S. Nandagopal 6 P 6 5 -

Sri. Pinnamaneni Koteswara Rao 5 P 2 - 1920

Sri. D.S. Reddy 2 - 4 - -

Sri. V.H. Ramakrishnan 5 P 3 2 -

Sri. A. Ramakrishna 5 P 12 2 -

Sri. O. Swaminatha Reddy 5 P 14 7 -

Non-Executive Promoter Director:

Sri. P.R. Ramakrishnan 6 P 5 - 2531

Executive Promoter Directors :

Dr. V.L. Dutt, Chairman & Managing Director 6 P 8 1 549225

Smt. V.L. Indira Dutt, Joint Managing Director 5 P 6 1 280274

Smt. Kavitha D Chitturi, Executive Director 6 P 2 1 59975

Executive Non Promoter Director :

Sri V. Gandhi, Technical Director 1 - - - -

I. BOARD OF DIRECTORS

Composition of Board and attendance particulars :

During the year six meetings were held on the following dates :

27-04-2005, 09-06-2005, 28-07-2005, 16-09-2005, 31-10-2005, 25-01-2006.

THE KCP LTD. .


In the Board Meeting held on 26th June 2006, the Board

has reviewed the Compliance Report received from all the

units of the Company with respect to compliance with

various statutory requirements.

The Board of Directors of the Company has put in a detailed

Code of Conduct for the Directors and the Employees of the

Company. The code is available on the Company's

corporate website.

II. REMUNERATION OF DIRECTORS

A. Remuneration to Non-Executive Directors for the

year ended 31st March, 2006

During the year, non-executive Directors were paid sitting

fees of Rs. 4,000 (Rupees Four thousand only) each for

every meeting of the Board and Committee of Board

attended by them.

B. Remuneration to Executive Directors.

Remuneration to all the Executive Directors is paid within

the limits prescribed under the provisions of the Companies

Act, 1956, and is approved by the Board of Directors based

on the recommendations of the Remuneration Committee

and sanctioned by the Shareholders at their meeting and

Government, where required.

Particulars of their remuneration for the year ended 31st

March, 2006 are given below.

Particulars of Salary & Commission

Executive Perquisites (Rs.) Total

Director (Rs.)

V.L. Dutt 3,35,370 62,73,914 66,09,284

Chairman &

Managing Director

V.L. Indira Dutt 6,29,683 59,79,601 66,09,284

Joint Managing

Director

Kavitha Dutt Chitturi 8,78,899 17,64,815 26,43,714

Executive Director

V. Gandhi 2,67,652 2,13,089 4,78,041

Technical Director

III. COMMITTEES OF THE BOARD

A. Audit Committee

The Audit Committee provides direction to the audit and risk

management function in the Company and monitors the quality

of internal audit. The responsibilities of the Audit Committee

include among other things overseeing the financial reporting

process to ensure proper disclosure of financial statements,

recommending appointment and remuneration of external

auditors, reviewing the periodical interim and annual financial

statements before submission to the Board, reviewing adequacy

of internal control systems and adequacy, structure and staffing

of the internal audit function and discussing the scope of audit

with external auditors.

During the year, four meetings were held on the following dates :

09-06-2005, 28-07-2005, 31-10-2005, 25-01-2006.

The Audit Committee comprises 4 Non-Executive Independent

Directors and 1 Executive Director. The Committee is chaired by

an independent Director, Sri. S. Nandagopal, a Chartered

Accountant by qualification. In the opinion of the Board of

Directors, all the members of the Audit Committee are financially

literate, and also have accounting or related financial

management experience.

The composition of the Audit Committee is given below :

Number of

Members Meetings

attended

Non-Executive Independent Directors :

Sri. S. Nandagopal, Chairman 4

Sri. O. Swaminatha Reddy 3

Sri. V.H. Ramakrishnan 3

Sri. A. Ramakrishna 3

Executive Promoter Directors :

Smt. Kavitha D Chitturi 4

The Head of Internal Audit is the co-ordinator and the Company

Secretary is the Secretary to the Committee. The Statutory

auditors have also attended the audit committee meetings.

The Audit Committee reviewed the quarterly, half-yearly and

annual financial statements of the Company before submission

to the Board of Directors. It has also reviewed the financial and

other specified information of Subsidiary Companies.


Sri. S. Nandagopal, Chairman of the Audit Committee, attended

the Annual General Meeting of the Company held on 16th

September, 2005.

B. Share Transfer Committee

This Committee is constituted to approve transfer of shares.

During the year, sixteen meetings of Share Transfer Committee

were held on the following dates :

01-04-2005, 18-04-2005, 02-05-2005, 17-05-2005, 02-06,2005,

07-06-2005, 04-07-2005, 20-07-2005, 05-08-2005, 22-08-2005,

02-09-2005, 28-09-2005, 19-10-2005, 12-11-2005, 05-12-2005,

21-12-2005, 06-01-2006, 23-01-2006, 06-02-2006, 20-02-2006,

06-03-2006, 20-03-2006, 31-03-2006.

The Committee consisted of the following officers of the

Company.

Officers :

Sri. K.B. Pranesh, Secretary & Corporate G.M. (Finance)

Sri. K.V. Krishnamurthy, Group Internal Auditor (upto

02.09.2005)

Dr. A.V. Sivarama Prasad, Vice President (HRD & S)

Sri. R. Nandagopal, Sr. Manager (Internal Audit) (from

02.09.2005)

- Sri.K.B.Pranesh, Secretary and Corporate General

Manager (Finance) of the Company has been designated

as the compliance Officer.

- The Company had no applications for transfer of shares,

pending as at 31st March, 2006.

C. Shareholders/Investors' Grievance Committee

This Committee was reconstituted to attend to redressal of any

specific grievances raised by the shareholders

/ investors, with following Directors with effect from 28.01.2005 :

Sri. S. Nandagopal

Sri. V.H. Ramakrishnan

Sri. A. Ramakrishna

Sri. O. Swaminatha Reddy

The Company did not receive any complaints from shareholders

during the year.

D. Remuneration Committee.

Remuneration Committee consists of the following Directors :

1. Sri. S.Nandagopal

2. Sri. A. Ramakrishna

3. Sri. V.H. Ramakrishnan

4. Sri O Swaminatha Reddy

During the year, the Remuneration Committee consisting of the

following Directors met once during the year on 25th January,

2006, to consider and recommend remuneration payable to

Executive Directors.

1. Sri. S. Nandagopal

2. Sri. A. Ramakrishna

3. Sri. V.H. Ramakrishnan

IV. SHAREHOLDER INFORMATION

1. Ensuing Annual General Meeting

• Date and Time : 27th September, 2006 11 a.m.

• Venue : "Ramakrishna Buildings"

2, Dr. P.V. Cherian Crescent,

Egmore, Chennai 600 008.

2. Financial Year : April 1st to March 31st

3. Financial Calender :

1st Quarter - 1st April to 30th June

- Last week of July 2006

2nd Quarter - 1st July to 30th Sept.

-Last week of October 2006

3rd Quarter-1st Oct to 31st Dec

- Last week of January 2007

4th Quarter - 1st Jan to 31st March

- Last week of June 2007 (audited).

4. Book Closure :

19th September,2006 to 27th September,

2006 (both the days inclusive)

5. Dividend Payment Date :

3rd October 2006

6. Registered Office :

"Ramakrishna Buildings",

No. 2, Dr. P.V. Cherian Crescent, Egmore,

Chennai-600 008

7. Listing of Equity Shares on Stock Exchanges :

National Stock Exchange

THE KCP LTD. .


8. Stock Code :

Stock Exchange Stock Code

National Stock Exchange, KCP

Mumbai

9. Stock Performance :

10.Share Price Data

Month NATIONAL STOCK EXCHANGE (NSE)

High Low

April 2005 102.40 81.00

May 2005 126.40 87.00

June 2005 120.40 91.15

July 2005 111.00 89.00

August 2005 108.50 87.35

September 2005 134.40 98.00

October 2005 107.60 84.00

November 2005 127.40 88.00

December 2005 124.00 110.00

January 2006 229.80 115.45

February 2006 206.00 166.00

March 2006 193.00 167.30

11. Registrars & Transfer Agents for demat

& physical shares:

Integrated Enterprises India Limited

II Floor, "Kences Towers"

No. 1, Ramakrishna Street, North Usman Road,

T. Nagar, Chennai-600 017.

12. Share Transfer System

Share Transfer in physical form is normally effected within a

maximum period of 30 days of receipt of the documents, if found

in order. All share transfers are approved by the Share Transfer

Committee, which meets once in three weeks. All requests for

dematerialization of shares are processed and the confirmation

is given to the respective depositories, i.e., National Securities

Depository Limited (NSDL) and Central Depository Services

(India) Limited (CDSL) within 15 days.

13. Distribution of Shareholding as on March 31, 2006

No. of Equity No. of % No. of %Share

Shares held Shareholders Shareholders Shares holding

1 - 500 9126 85.67 1005667 7.80

501 - 1000 638 5.99 464464 3.60

1001 - 2000 378 3.55 541718 4.20

2001 - 3000 156 1.46 385808 2.99

3001 - 4000 81 0.76 284488 2.21

4001 - 5000 65 0.61 301378 2.34

5001 - 10000 97 0.91 687251 5.33

Above 10001 111 0.91 9221342 71.53

TOTAL 10652 100.00 12892116 100.00

14. Categories of Shareholding as on March 31, 2006

Category No.of No. of %

Shareholders Shares ShareholdingClearing Member 60 49906 0.3871

Bank Foreign 1 50 0.0004

Foreign Institutional 2 7578 0.0588

Indian Financial Institutions 17 546415 4.2384

Indian Promoters 27 5963824 46.2595

Mutual Funds & UTI 4 1550 0.0120

NRI / OCBs 26 167571 1.2998

Private Corporate Bodies 286 565918 4.3897

Indian Public 10228 5585473 43.3247

Trusts 0.0094 3831 0.0297

TOTAL 10652 12892116 100.0000

15. Dematerialisation of shares and liquidity

36.74% of total Equity Capital is held in dematerialized form with

NSDL and CDSL as on March 31, 2006. Trading in Equity

shares of the Company is permitted only in demateialised form

with effect from 29th May 2000 as per notification issued by the

Securities and Exchange Board of India. (SEBI)

16. The Company has not issued any GDRs/ ADRs/ Warrants

or any other convertiable instruments that are outstanding at the

Balance Sheet Date.


17. Plant Locations :

CEMENT :

Macherla - 522 426

Guntur District, Andhra Pradesh

ENGINEERING :

1) Tiruvottiyur, Chennai-600 019

Tamil Nadu

2) Mosur Road,

Ekhunagar, Arakonam-631 004

Tamil Nadu.

ELECTRICITY ENERGY HYDEL UNIT :

B.No. AE-1, NSP Colony

Nekarikallu-522 615

Guntur District

Andhra Pradesh

WIND POWER :

Thandayarkulam Village

Radhapuram Taluk

Tirunelveli District

Tamil Nadu

V. OTHER DISCLOSURES

1. Details of Annual General Meetings

Location and time of Annual General Meetings held in last 3 years :

Year AGM Location Date Time

2003 62nd "Ramakrishna Buildings" 29/09/2003 11.30 a.m.

2, Dr. P.V. Cherian Crescent

Egmore, Chennai-600 008

2004 63rd "Ramakrishna Buildings" 09/09/2004 11.00 a.m.



2005 64th "Ramakrishna Buildings" 16/09/2005 10.00 a.m.



2. Special Resolutions :

At the last AGM held on 16th September, 2005, one special

resolution was passed, to transact the business of

appointment of Auditors.

Resolution referred to above was put to vote at the AGM and

was passed unanimously.

3. Means of Communication

Quarterly results of the Company in the prescribed proforma

were published in the following newspapers :-

Business Line

Financial Express

Dhinamani

Malaimurasu

These results were simultaneously posted on the website of

the Company at www.kcp.co.in. Information as prescribed

was posted to Electronic Data Information Filing And Retrieval

Systems (EDIFAR) during the year. The Company has not

issued any official news release about its financial results

during the year. A management discussion analysis of

relevant matters forms part of the Report of the Board of

Directors.

CERTIFICATE TO THE SHAREHOLDERS /

MEMBERS OF THE K.C.P. LIMITED

I, V.L.Dutt, Chairman & Managing Director of the Company

hereby confirm that all the members of your Board and the

Senior Management Personnel of your Company have

confirmed the compliance to the Code of Conduct of the

Company during the year ended 31.3.2006.

For THE K.C.P. LIMITED

V.L. DUTT

CHAIRMAN & MANAGING DIRECTOR

Place : Chennai

Date : 26th June, 2006

THE KCP LTD. .

AUDITOR'S REPORT TO THE SHAREHOLDERS OF THE KCP LIMITED

We have audited the attached Balance Sheet of TheKCP Limited, as at 31st March 2006, its Profit and LossAccount for the year ended on that date annexed thereto, andits cash-flow statement for the year ended on that date. Thesefinancial statements are the responsibility of the Company'smanagement. Our responsibility is to express an opinion onthese financial statements based on our audit.We conducted our audit in accordance with auditing standardsgenerally accepted in India. Those Standards require that weplan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing theaccounting principles used and significant estimates made bymanagement, as well as evaluating the overall financialstatement presentation. We believe that our audit provides areasonable basis for our opinion.As required by the Companies (Auditors' Report) Order, 2003issued by the Government of India in terms of sub-Section(4A) of Section 227 of the Companies Act, 1956, we enclose inthe Annexure a statement on the matters specified inparagraphs 4 and 5 of the said Order.Further to our comments in the Annexure referred to above, wereport that:a. We have obtained all the information and explanations,

which to the best of our knowledge and belief werenecessary for the purposes of our audit;

b. In our opinion, proper books of account as required by lawhave been kept by the company so far as appears fromour examination of such books;

c. The Balance Sheet and Profit and Loss Account andCash-flow Statement dealt with by this report are in

agreement with the books of account;d. In our opinion, the Balance Sheet and Profit and Loss

account and the Cash-flow Statement dealt with by thisreport comply with the Accounting Standards referred to insub-section (3C) of Section 211 of the Companies Act,1956;

e. On the basis of written representations received from thedirectors, as on March 31, 2006, and taken on record bythe Board of Directors, we report that none of the directorsis disqualified as on March 31, 2006 from being appointedas a director in terms of clause (g) of sub-section (1) ofSection 274 of the Companies Act, 1956;

f. In our opinion and to the best of our information andaccording to the explanations given to us, the saidaccounts give the information required by the CompaniesAct, 1956, in the manner so required and give a true andfair view in conformity with the accounting principlesgenerally accepted in India;

i. In the case of the Balance Sheet, of the state of affairs ofthe Company as at March 31, 2006,

ii. In the case of the Profit and Loss Account, of the profit forthe year ended on that date,

iii. In the case of the cash-flow statement, of the cash-flowsof the company for the year ended on that date

For BRAHMAYYA & COChartered Accountants

Place: ChennaiDate: 26th June 2006

C. Muralikrishna(ICAI Memb.No.20884)

Partner

ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE

1.1 According to the information and explanations furnishedto us, the company has maintained proper recordsshowing full particulars including quantitative details andsituation of its fixed assets.

1.2 According to the information and explanations furnishedto us, the company has physically verified some of itsfixed assets during the year, in accordance with a phasedprogramme of verification, which, in our opinion, isreasonable, having regard to the size of the company andthe nature of the assets. As per the said information andexplanations, no material discrepancies were noticed onsuch verification carried out during the year.

1.3 According to the information and explanations furnishedto us, the company has not disposed of a substantial partof its fixed assets during the year.

2.1 According to the information and explanations furnishedto us, the company has physically verified its inventoriesduring the year. In our opinion, the frequency of suchverification is reasonable.

2.2 In our opinion, the procedures of physical verification ofinventories followed by the management are reasonableand adequate in relation to the size of the company andthe nature of its business.

2.3 According to the information furnished to us, the companyis maintaining proper records of its inventory and thediscrepancies if any noticed on verification between thephysical stocks and the book records were not material,and have been properly dealt with in the books of account.

3.1 According to the information and explanations furnishedto us, the company has not granted any loans tocompanies, firms or other parties covered by the registermaintained under Section 301 of the Companies Act1956, at the beginning of the year or during the year, andconsequently reporting under sub-clauses b, c and d ofclause 4(iii) of the Order does not arise during the year.

3.2 According to the information and explanations furnishedto us, the company has taken loans aggregating toRs.42503000 from Three Directors and one company,covered by the register maintained under Section 301 ofthe Companies Act 1956.

3.3 In our opinion, the rate of interest and other terms andconditions on which loans have been taken by thecompany from companies, firms or other parties covered


Annual Report 2006

by the register maintained under section 301 of theCompanies Act, 1956 are not, prima facie, prejudicial tothe interest of the company.

3.4 According to the information and explanations furnished tous, the company has been regular in repaying the principaland interest amounts as stipulated on the loans taken byit from the parties listed in the registers maintained underSection 301 of the Companies Act 1956.

4. In our opinion and according to the information andexplanations given to us, there are adequate internalcontrol procedures commensurate with the size of thecompany and the nature of its business with regard topurchases of inventory, fixed assets and with regard to thesale of goods and services. Further, during the course ofour audit, we have not come across any instances ofmajor weaknesses in internal control that requirecorrection and have so continued without correction.

5.1 Based on the information and explanations given to us, weare of the opinion that the transactions that are required tobe entered in the register maintained under section 301 ofthe Companies Act, 1956 have been so entered.

5.2 In our opinion and according to the information andexplanations given to us, the transactions which havebeen entered into, pursuant to contracts that have beenentered in the register maintained under Section 301 ofthe Companies Act 1956, have been made at prices whichare reasonable having regard to prevailing market pricesat the relevant time.

6. In our opinion and according to the information andexplanations given to us, the company has compliedwith the provisions of section 58A and 58AA and otherapplicable provisions of the Companies Act, 1956 andCompanies (Acceptance of Deposits) Rules, 1975 withregard to the deposits accepted from the public. Accordingto the information furnished to us, no Order has beenpassed on the company by the Company Law Board orNational Company Law Tribunal or Reserve Bank of Indiaor any Court or any other Tribunal for non-compliance withthe provisions of Sections 58A and 58AA of theCompanies Act 1956.

7. In our opinion, the company has an internal audit systemcommensurate with the size and nature of its business.

8. We have broadly reviewed the books of account andrecords maintained by the company at its cement andelectric power generation units pursuant to the Rulesmade by the Central Government for the maintenance ofCost Records under section 209 (1) (d) of the CompaniesAct, 1956 and we are of the opinion that prima facie theprescribed accounts and records have been made andmaintained. However, we are not required to and have notcarried out a detailed audit of the same.

9.1 According to the information furnished to us, the company

has generally been regular in depositing with theappropriate authorities, the undisputed statutory duesincluding Provident Fund, Investor Education ProtectionFund, Employees' State Insurance, Income Tax, SalesTax, Wealth Tax, Service Tax, Custom Duty, Excise Duty,Cess and other material statutory dues applicable to it.

9.2 There were no undisputed statutory dues mentioned in thepreceding paragraph in arrears, as at the date of theBalance Sheet under report, for a period of more than sixmonths from the date they became payable.

9.3 According to the information furnished to us, there were noamounts of Sales Tax, Customs Duty, Excise Duty, Cess,Income Tax, Wealth Tax, Service Tax that have beendisputed by the company, and hence, were not remitted tothe concerned authorities at the date of the Balance Sheetunder report, except

10. According to the information and explanations furnished tous by the company, it had no accumulated losses at theend of the financial year, and it did not incur cash lossesduring the financial year covered by our audit and in theimmediately preceding financial year.

11. In our opinion and according to the information andexplanations furnished to us by the company, there wereno defaults in repayment of dues to financial institutions,banks or debenture holders at the date of the BalanceSheet.

12. According to the information furnished to us, the companyhas not granted any loans or advances on the basis ofsecurity by way of pledge of shares, debentures, and othersecurities.

13. In our opinion and according to the information andexplanations furnished to us, the company is not a chitfund or a nidhi / mutual benefit fund/ society and hence,the requirements of clause 4(xiii) of the Companies(Auditor's Report) Order, 2003 are not applicable to thecompany during the year under report.

14. According to the information furnished to us, the companyis not dealing in or trading in shares, securities,debentures and other investments. Accordingly, therequirements of clause 4(xiv) of the Companies (Auditor'sReport) Order, 2003 are not applicable to the company.

15. In our opinion, and according to the information furnishedto us, the terms and conditions on which the company hasgiven guarantees for loans taken by its subsidiary frombanks are not prejudicial to the interest of the company.

S. Nature of Applicable Amount Pending

No Dues Statute (in Rs.) Before

1 Sales Tax Sales Tax 14509683 Various

& Related Acts of Appellate

Demands various State authorities

Governments

25

THE KCP LTD. .


16. In our opinion, and according to the information andexplanations furnished to us, the term loans taken by thecompany have been applied for the purpose for which theywere raised.

17. According to the information and explanations given to usand on an overall examination of the Balance Sheet of thecompany, we report that funds raised on short-term basishave not been used for long-term investment,

18. According to the information and explanations furnished tous, the company has not made any preferential allotmentof shares during the year to parties and companiescovered in the register maintained under section 301 ofthe Act, or to any others.

19. According to the information and explanations given to us,the company has not issued any debentures during theyear under report.

20. The company has not raised any moneys through publicissue of its securities during the year, and the question ofend use of such moneys does not arise during the year.

21. According to the information and explanations furnished tous, and based on the audit procedures generally adoptedby us, we report that, during the year, no fraud on or by thecompany has been noticed or reported that is eithersignificant or could have caused a material misstatementin the financial statements.

For BRAHMAYYA & COChartered Accountants

Place: ChennaiDate: 26th June 2006

C. MURALIKRISHNA(ICAI Memb. No. 20884)

Partner

The Members

The K C P Limited

Ramakrishna Buildings

No.2, Dr.P.V.Cherian Crescent

Egmore

Chennai - 600 008

We have examined the compliance of conditions of

Corporate Governance by The KCP Limited for the year ended

March 31, 2006 as stipulated in clause 49 of the Listing

Agreement of the said Company with the stock exchange(s).

The compliance of conditions of Corporate Governance is the

responsibility of the management. Our examination was

limited to procedures and implementation thereof, adopted by

the Company for ensuring the compliance of the conditions of

Corporate Governance. It is neither an audit nor an expression

of opinion on the financial statements of the Company.

In our opinion and to the best of our information and according

to the explanations given to us, and the representations made

by the directors and the management, we certify that the

Company has complied with the conditions of Corporate

Governance as stipulated in the above mentioned Listing

Agreement.

We further state that such compliance is neither an assurance

as to the future viability of the Company nor the efficiency or

effectiveness with which the management has conducted the

affairs of the Company.

For BRAHMAYYA & CO

Chartered Accountants

Camp: Chennai

Date :26th June 2006

C. MURALIKRISHNA

ICAI Memb.No.20884

Partner

AUDITORS' CERTIFICATE ON CORPORATE GOVERNANCE

Annual Report 2006

AS AT AS ATPARTICULARS Schedule 31-03-2006 31-03-2005

Rs. Rs. Rs. Rs.(I) SOURCES OF FUNDS:

1. Shareholders' Funds:(a) Capital A 12,89,21,160 12,89,21,160 (b) Reserves & Surplus B 96,25,11,433 86,10,47,977

1,09,14,32,593 98,99,69,137 2. Loan Funds:

(a) Secured Loans C 34,16,16,607 21,02,79,666 (b) Unsecured Loans D 26,55,20,000 25,98,89,000

60,71,36,607 47,01,68,666 3. Deferred Tax Liability (Net)

(a) Deferred Tax Liability 7,82,87,248 8,04,33,212 (b) Less: Deferred Tax Asset 37,59,240 36,42,885

7,45,28,008 7,67,90,327

Total 1,77,30,97,208 1,53,69,28,130

(II) APPLICATION OF FUNDS:1. Fixed Assets:

(a) Gross Block E 1,72,43,23,767 1,69,41,50,317 (b) Less: Depreciation 1,03,44,73,706 1,01,61,09,803

(c) Net Block 68,98,50,061 67,80,40,514

(d) Capital Work-in-Progress 6,73,81,899 69,57,109 75,72,31,960 68,49,97,623

2. Investments F 31,60,55,849 33,40,55,149

3. Current Assets,Loansand Advances:

(a) Inventories G-1 51,20,49,115 37,85,01,161 (b) Sundry Debtors G-2 14,05,78,201 15,33,89,927 (c) Cash and Bank Balances G-3 17,06,55,500 6,40,01,313 (d) Other Current Assets G-4 74,54,500 53,44,556 (e) Loans and Advances H 55,96,72,074 46,28,47,472

1,39,04,09,390 1,06,40,84,429 Less : Current Liabilities

and Provisions:(a) Liabilities I-1 46,89,73,433 43,78,01,231 (b) Provisions I-2 22,16,26,558 10,84,07,840

69,05,99,991 54,62,09,071 Net Current Assets 69,98,09,399 51,78,75,358

Total 1,77,30,97,208 1,53,69,28,130

BALANCE SHEET AS AT 31st MARCH 2006

Notes , Schedules & Statement on Accounting Policies form an integral part of the Balance Sheet(FOR AND ON BEHALF OF THE BOARD)

Place : Chennai - 600 008.Date : 26th June 2006

V.L. DUTT V.L. INDIRA DUTT KAVITHA D. CHITTURI C. MURALIKRISHNAChairman & Joint Managing Director Executive Director (ICAI Memb. No. 200884)

Managing Director

S. NANDAGOPAL V. GANDHI K. SRIDHARDirector Technical Director Company Secretary &

Chief Financial Officer

Per our report annexedfor BRAHMAYYA & CO.Chartered Accountants

27

THE KCP LTD. .

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31st MARCH, 2006

For the For the

Particulars Schedule year ended year ended

31-03-2006 31-03-2005

Rs. Rs.

INCOME FROM :

Sale of Products and Services (including Excise duty 1,97,37,96,142 1,63,89,30,242

recovered Rs.317215602/- (Rs.274622509/-) and

Service Tax Rs. 1650911/-(Rs.818473/-)

Other Income 1 9,42,51,630 4,74,08,484

2,06,80,47,772 1,68,63,38,726

EXPENDITURE ON :

Materials Consumed 2 29,01,67,514 26,50,91,518

Payments and Benefits to Employees 3 18,82,85,442 16,66,90,494

Manufacturing,Selling,Administrative

and other expenses 4 91,96,03,616 72,96,41,908

Excise Duty and Taxes (excluding Income-Tax) 5 32,52,26,909 28,04,51,310

Interest and Finance charges 4,43,85,574 4,89,02,164

Depreciation 5,18,68,660 4,93,70,009

1,81,95,37,715 1,54,01,47,403

PROFIT FOR THE YEAR: 24,85,10,057 14,61,91,323

Add:Refund of Income Tax 56,92,257

Differed Tax Liability reversal -22,62,319 -30,61,280

Less: Provision for Taxation - Current 7,65,00,000 5,25,00,000

Fringe Benefit Tax 50,00,000

PROFIT AFTER TAXATION 17,49,64,633 9,67,52,603

Balance brought forward from last Year 53,30,56,833 50,15,42,974

70,80,21,466 59,82,95,577

This year Previous year

Add : Withdrawn from Investment Allowance Rs. Rs.

Reserve 8,88,95,000 8,88,95,000

Less : Transfer to General Reserve 12,50,00,000 11,00,00,000 12,50,00,000 11,00,00,000

Proposed Dividend 6,44,60,580 3,86,76,348 6,44,60,580 3,86,76,348

Tax on distributed Profits 90,40,596 54,57,396 90,40,596 4,41,33,744

(see Directors' Report)

Balance carried forward to next Year 50,95,20,289 53,30,56,833

Basic Earnings per equity share of Rs.10 each -(EPS) 13.57 7.50

Net Profit after tax Rs.174964633/- (Rs.96752603/-)/No.of equity shares 12892116 (12892116)

Notes , Schedules & Statement on Accounting Policies form an integral part of the Profit & Loss Account (FOR AND ON BEHALF OF THE BOARD)


V.L. DUTT V.L. INDIRA DUTT KAVITHA D. CHITTURI C. MURALIKRISHNAChairman & Joint Managing Director Executive Director (ICAI Memb. No. 200884)

Managing Director


Chief Financial OfficerPlace : Chennai - 600 008.Date : 26th June 2006


Annual Report 2006

Schedule 'A'

“Share Capital”

AS AT AS ATPARTICULARS 31-03-2006 31-03-2005

Rs. Rs.Authorised:50000000 Equity Shares of Rs.10/- each 50,00,00,000 50,00,00,000 Issued:

12897748 Equity Shares of Rs.10/- each 12,89,77,480 12,89,77,480 Subscribed and Paid-up:

12892116 Equity Shares of Rs.10/-each fully paid 12,89,21,160 12,89,21,160

Total taken to Balance Sheet 12,89,21,160 12,89,21,160

Note: Of the above equity shares, 1,26,65,220 shares represent Bonus Shares alloted asfully paid up , by capitalisation of Profits / Reserves.

Schedule 'B'

"Reserves & Surplus"

AS AT Added Withdrawn AS AT

PARTICULARS 31-03-2005 during the during the 31-03-2006

year year

Rs. Rs. Rs. Rs.

Capital Reserve - on reorganisation 2,79,91,144 Nil Nil 2,79,91,144

General Reserve 30,00,00,000 12,50,00,000 42,50,00,000 Surplus (i.e) Balance inProfit and Loss Account 53,30,56,833 50,95,20,289

Total taken to Balance Sheet 86,10,47,977 12,50,00,000 96,25,11,433

Schedule 'C'

"Secured Loans"


Rs. Rs.

I. Short-Term Loans:

a) Working capital facilities from bank against paripassu first chargeon Current Assets at Cement Unit and a second charge paripassuon the fixed assets of the Cement and Engineering units 10,00,00,000 14,06,60,881

b) Packing credit facilities against hypothecation of specific current assets of Engineering Unit, and guaranteed bysome of the Directors. Nil 2,42,18,371

c) From a bank against paripassu first charge on the entire Fixed Assets of the Company 10,00,00,000 Nil

d) From a Company on the security of some of the shares held as investments. 1,15,00,000 1,72,50,000

II. Long-Term Loans :a) From a bank secured by parripassu first charge with other

term lenders, by hypothecation of all the fixed assets, ofthe Company, present and future. 12,82,15,735 2,40,00,000(Including interest accrued and due on above)

b) From a bank against securtiy of specific assets. 19,00,872 41,50,414


SCHEDULES ANNEXED TO AND FORMING PART OF THE BALANCE SHEET

29

THE KCP LTD. .

Schedule ‘D’II. Unsecured Loans :


Rs. Rs.i) Fixed Deposits 23,91,20,000 25,98,89,000

(including Rs.4603000/- (Rs.4603000/-) from Directors)

ii) From Directors 2,64,00,000


Schedule 'F'"Investments"


Details Total TotalRs. Rs. Rs.

I.SHARES OF COMPANIES:1.Trade Investments:( a) Quoted Equity Shares - Fully paid

1,00,000 shares of Rs.10/- each in 10,00,000 Prudential Mouli Sugars Ltd.

Less : Written off to the extent of (A) 9,99,999 1 1 (b) Unquoted Equity Shares - Fully paid:

i) 4,00,000 Shares of Rs.10/- each in Fives Cail KCP Limited 40,00,000 40,00,000

ii) 36,00,000 Equity Shares of Rs.10/- each inSudalagunta Sugars Limited 3,60,00,000 5,40,00,000 (1800000 shares sold during the year)

(B) 4,00,00,000 5,80,00,0002. Non-Trade Investments:(a) Quoted Equity Shares - Fully Paid:

(i) 350 Shares of Rs.10/-each in ICICI Bank Limited 18,005 18,005

(ii) 50,000 Shares of Rs.10/- each in SouthAsian Financial Exchange Limited 5,00,000

Less : Written off to the extent of 4,99,999 1 1 (iii) 300 Shares of Rs.10/each in State

Bank of India 30,000 30,000 (iv) 2,44,000 Equity Shares of Rs.10/- each

in Vantech Industries Limited. 1,00,91,937 Less : Written off to the extent of 1,00,91,936 1 1 (v) 100 Shares of Rs.10/each in Industrial

Finance Corporation of India 3,500 Less : Provision for diminution in value 2,170 1,330 1,330

(vi) 14240 shares of Rs.10/- each inIndustrial Development Bank of India 11,57,000 11,57,000

12,06,337 (C) 12,06,337 12,06,337

(b) Unquoted Equity Shares - Fully Paid:(i) 30 Equity Shares of Rs.10/-each in

Andhra Pradesh Heavy Machinery &Engineering Company Limited 300

Less : Written off to the extent of 299 1 1 (ii) 500000 Equity Shares of Rs.10/- each

in Somayajulu & Company Limited 50,00,000 50,00,000

In Subsidiary companies:

(iii)6000000 Equity Shares of US$ 1 each,KCP Vietnam Industries Ltd, Vietnam.(See Note. 10) 23,71,43,668 23,71,43,668

(iv) 3750070 Equity Shares of Rs.10/- eachin KCP Bio-tech Limited. 2,71,17,675 2,71,16,975

(70 Shares purchased during the year)

26,92,61,344

(D) 26,92,61,344 26,92,60,644




Details Total TotalRs. Rs. Rs.

II. OTHER INVESTMENTS:

(a) Quoted:

Unit Trust of India

(earmarked towards deposits under Companies(Acceptance of Deposits)Rules ,1975 )(i) 53850 6.75% Tax free Bonds of Rs.100 /- each 53,85,000 53,85,000 (ii) 23918.49 Units of US 2002 Scheme 2,02,617 2,02,617

(b) Unquoted:

(i) National Savings Certificates 50 50

(ii) Postal Time Deposit 500 500

55,88,167

(E) 55,88,167 55,88,167

Total taken to Balance Sheet A+B+C+D+E 31,60,55,849 33,40,55,149

1. All the above are long term investments.

2. Aggregate values of quoted investments :

At Cost 67,96,125 67,96,125

At Market value 73,19,255 70,45,424

3. Aggregate cost of unquoted investments 30,92,61,894 32,72,61,194

Schedule 'G-1'

"Current Assets" Inventories


Rs. Rs.(as certified by the Managing Director.)

(1) Stores and Spares at Cost 20,76,10,007 13,98,16,081

(2) Stores and Raw Materials in transit at Cost 63,81,708 1,57,531

(3) Stocks-in-trade

a) Raw Materials at cost 2,09,35,825 1,45,63,221

b) i) Finished Goods at Cost 2,05,37,921 99,78,581

ii) Finished Goods at Market Value 9,58,012 1,48,73,692

(c) Work-in-progress at cost 25,56,25,642 19,91,12,055


Schedule 'G-2'

"Sundry Debtors"


Rs. Rs.Sundry Debtors(A) Debts outstanding for a period exceeding six months:

Considered Good (a) Fully Secured: 26,86,282 25,83,813(b) Unsecured: 62,81,291 4,67,127

Considered Doubtful 0 5,22,405 89,67,573 35,73,345

Less: Provision for doubtful debts 0 5,22,405

89,67,573 30,50,940 (B) Other Debts Considered Good

(including Rs.Nil/-(Rs.2230656/-)due from Subsidiary Companies)(a) Fully Secured 41,11,773 46,76,934 (b) Unsecured 12,74,98,855 14,56,62,053


THE KCP LTD. .


Sch

ed

ule

'E

'

"Fix

ed

As

se

ts"

GR

OS

S B

LO

CK

DE

PR

EC

IAT

ION

NE

T

BL

OC

K

Seri

al

D

ES

CR

IPT

ION

Co

st

up

toA

dd

itio

ns

Ded

ucti

on

sC

ost

up

toTo

tal

As

at

As

at

No

.31-0

3-2

005

du

rin

g t

he

du

rin

g t

he

31-0

3-2

006

Dep

recia

tio

n31-0

3-2

006

31-0

3-2

005

year

year

up

to 3

1-0

3-2

006

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

1

Lands

15639418

509830

-16149248

-16149248

15639418

2.

(a)

Build

ings

183653774

2149540

-185803314

77323853

108479461

110265760

(b)

Leasehold

Build

ings

1547500

--

1547500

412342

1135158

1160382

3

T

ram

ways &

Railw

ay S

idin

gs

7012865

--

7012865

511

2053

1900812

2223544

4

P

lant

& M

achin

aries

Ow

ned

1385970044

53589211

27148737

1412410518

877563743

534846775

525160803

Leased A

ssets

803107

--

803107

762951

40156

40156

5

F

urn

iture

,Fix

ture

s &

Offic

e E

quip

ments

35245930

1770819

782952

36233797

27030008

9203789

9034380

6

V

echic

les &

Eart

hm

ovin

g E

quip

ments

Ow

ned

54542144

7347948

6722268

55167824

38590431

16577393

10989228

Leased A

ssets

8022630

-539942

7482688

5996716

1485972

3494045

7

R

esearc

h &

Develo

pm

ent

Equip

ments

812906

--

812906

781609

31297

32797

8

P

ate

nts

900000

--

900000

900000

- -

Gra

nd T

ota

l1694150317

65367348

35193899

1724323767

1034473706

689850061

678040514

1

Regis

tere

d O

ffic

e79096422

5617171

364154

84349439

43887764

40461675

38109372

2

Engin

eering U

nit

308777090

37044981

4611

46

345360925

275166851

70194074

37984450

3

Cem

ent

Pro

duction U

nit,

Macherla

763374572

19328547

34419752

748283367

523613340

224670027

223266218

4

Researc

h &

Develo

pm

ent

1554404

--

1554404

1360492

193912

203971

5

Hyd

el P

roje

ct

524837099

1599546

12887

526423758

184750178

341673580

366493173

6

Cem

ent

Mark

eting

5780131

1621215

23950

7377396

3505688

3871708

3001083

7.

Engin

eering U

nit A

rakkonam

10730600

243878

-10974478

2189393

8785085

8982246

Tota

l1694150317

65455338

35281889

1724323767

1034473706

689850061

678040514

Less:I

nte

rnal T

ransfe

rs-

-87990

87990

--

-

Gra

nd T

ota

l1694150317

65367348

35193899

1724323767

1034473706

689850061

678040514

Annual Report 2006

Schedule 'G-3'

"Cash and Bank Balances"


Rs. Rs.

(1) Cash /Cheques on hand 56,17,866 75,56,412

(2) At Scheduled Banks:

i) in Fixed Deposits 11,38,70,023 4,43,71,024

ii) in Current Accounts 5,11,67,611 1,20,73,877


Schedule 'G-4'

Other Current Assets"


Rs. Rs.Interest accrued 74,54,500 53,44,556 (includes Rs.4958256/- (Rs.3347137/-) from subsidiary)

Total taken to Balance Sheet 74,54,500 53,44,556

33

Schedule "H"

"Loans And Advances"


Rs. Rs.

(1) Advances, ( unsecured , recoverable in cash or in kind , for value to be received )Considered Good 5,09,79,521 (includes Rs.3,98,864/- (Rs.11,32,976/-) to Subsidiaries.)Considered Doubtful 37,36,597

5,47,16,118Less : Provision for Doubtful Advances 37,36,597 5,09,79,521 4,95,73,933

(2) Prepaid Expenses 1,01,44,524 1,33,92,129

(3) Excise Duty paid in advance 4,22,74,165 1,48,32,761

(4) Direct Taxes paid in advance 15,53,42,411 12,41,71,297

(5) Income-tax deducted at source 74,79,438 26,36,291

(6) Deposits recoverable 3,18,54,354 3,90,07,891

(7) Claims recoverable 1,07,28,096 24,38,139

(8) Loans to a Subsidiary Companies 25,08,69,565 21,67,95,031


THE KCP LTD. .

Annual Report 2006

Schedule "I-1"

"Current Liabilities and Provisions"

A. CURRENT LIABILITIES :


Rs. Rs.

(1) a. Sundry Creditors - Due to Small Scale Industrial Undertakings 13,20,454

b. Sundry Creditors- Due to Others

(includes Rs.1,42,61,451/-(Rs.60,18,897/-) due to Managing and

whole time directors) 16,61,39,684 19,55,09,244

(2) Advances received against sales 24,74,76,987 18,44,31,707

(3) Trade Deposits 3,60,30,000 3,61,13,500

(4) Security Deposits from staff 1,52,124 48,400

(5) Unclaimed Dividends * 38,68,122 43,03,961

(6) Interest accrued but not due on loans 87,95,679 72,67,322

(7) Due to Superannuation and Gratuity Trusts(Net) 65,10,838 88,06,643


Note:*There are no amounts due to be remitted to Investor Education Protection Fund out of these amounts.

Schedule "I-2"

B. PROVISIONS:


Rs. Rs.(1) For Income Tax & Wealth Tax 13,81,71,360 5,66,71,360 (2) For Proposed Dividend 6,44,60,580 3,86,76,348 (3) For Tax on Distributed Profits 90,40,596 54,24,358 (4) For Leave Encashment 99,54,022 76,35,774


Signature to Schedules A to I-2(FOR AND ON BEHALF OF THE BOARD)


V.L. DUTT V.L. INDIRA DUTT KAVITHA D. CHITTURI C. MURALIKRISHNA

Chairman & Joint Managing Director Executive Director Partner

Managing Director




34

Annual Report 2006

Schedule-1

"Other Income"For the For the

year ended year endedPARTICULARS 31-03-2006 31-03-2005

Rs. Rs.

(1) Interest received from Banks and others

(Tax deducted on above Rs.1016436/- Previous

year Rs.401764/-) 6,61,11,889 1,45,31,097

(2) Dividends received (Gross)

From Non-Trade Investments 2,67,405 2,55,925

(3) Rents received 12,16,944 11,67,613

(4) Miscellaneous Receipts 1,53,29,956 1,74,23,443

(5) Profit on sale of Assets 8,77,138 13,41,867

(6) Unclaimed balances credited back 3,63,878 57,61,946

(7) Claims/refunds received 8,77,726 4,21,153

(8) Provisions no longer required credited back 63,01,840 40,05,440

(9) Bad debts recovered 25,00,000

(10) Difference in Exchange (Net) 29,04,854

Total taken to Profit and Loss Account 9,42,51,630 4,74,08,484

Schedule-2

"Materials Consumed"For the For the

year ended year endedPARTICULARS Details 31-03-2006 Details 31-03-2005

Rs. Rs. Rs. Rs.

OPENING STOCKS:Raw materials 1,45,63,220 65,85,275 Work-in-Progress 19,91,12,055 9,87,10,164Finished goods 2,48,52,273 7,53,80,651

23,85,27,548 18,06,76,090 ADD:i) Purchases:

Raw materials & Components 18,82,91,295 21,21,06,586

ii) Cost of raw materials produced 16,14,06,071 11,08,36,390 34,96,97,366 32,29,42,976 58,82,24,914 50,36,19,066

LESS:CLOSING STOCKS:

Raw materials 2,09,35,825 1,45,63,220 Work-in-Progress 25,56,25,642 19,91,12,055 Finished goods 2,14,95,933 2,48,52,273

29,80,57,400 23,85,27,548


SCHEDULES ANNEXED TO AND FORMING PART OF PROFIT AND LOSS ACCOUNT

35

THE KCP LTD. .

Schedule-3

"Payments and Benefits to Employees"For the For the

year ended year endedPARTICULARS 31-03-2006 31-03-2005

Rs. Rs.Salaries, Wages and Bonus 14,79,73,696 13,01,19,408 Contribution to Provident Fund and Family

Pension Scheme 99,11,977 95,05,972 Contribution to Superannuation Funds 53,23,652 49,07,972 Contribution to Gratuity Funds 56,23,993 44,95,198 Workmen and Staff Welfare expenses 1,94,52,124 1,76,61,944


Schedule-4

"Manufacturing ,Selling, Administrative and Other Expenses"

For the For theyear ended year ended

PARTICULARS 31-03-2006 31-03-2005Rs. Rs

Manufacturing: Stores and Spares (including Packing Materials) consumed. 18,91,27,804 15,24,98,302 Sub-contracted works 5,39,57,305 4,62,76,111 Power and Fuel 46,11,11,436 Less:Self consumption of Power generated internally 9,99,10,467 36,12,00,969 31,08,69,393 Insurance 51,35,761 48,85,672 Research & Development 3,97,424 3,65,134 Lease Rentals 1,24,45,636 10,37,487 Repairs to Buildings 1,96,02,063 1,41,79,294 Repairs to Machinery 2,31,81,188 3,03,39,532 Repairs to Other Assets 70,70,865 65,36,976

(A) 67,21,19,014 56,69,87,901 Selling:

Advertisement 57,09,626 66,55,879 Loading,Unloading,Transport etc 15,33,01,073 6,81,27,822 Commission on Sales 11,01,553 20,88,377

(B) 16,01,12,252 7,68,72,078Administrative:

Rent 13,61,802 10,88,154 Payments to Auditors (see note No.16(a)) 19,62,921 10,83,793 Directors' Sitting Fee 2,00,000 2,80,000 Managerial Remuneration (see note no.17(ii)) 1,63,40,322 76,18,315 Miscellaneous Expenses 6,08,33,051 5,97,84,312

(C) 8,06,98,096 6,98,54,574 Other Items:

Warranty Claims 34,58,553 84,33,371 Provision for doubtful debts 3,18,319 14,875 Bad debts and irrecoverable advances written off 10,53,508 6,83,393 Discarded assets written off 16,31,619 3,259 Loss on sale of assets 2,12,255 1,78,697 Investments written off 9,99,999

Difference in exchange (Net) 56,13,761

(D) 66,74,254 1,59,27,355

Total taken to Profit and Loss Account A+B+C+D 91,96,03,616 72,96,41,908


Annual Report 2006

Schedule-5

"Excise Duty & Taxes (Excluding Income tax)"

For the For theyear ended year ended

PARTICULARS 31-03-2006 31-03-2005

Rs. Rs.

Excise Duty and Cess 31,80,03,021 27,16,06,272

Rates and Taxes 72,23,888 88,45,038


Signatures to Schedules 1 to 5 (FOR AND ON BEHALF OF THE BOARD)




Managing Director




37

THE KCP LTD. .

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

1. GENERAL

Financial statements are prepared under the historical

cost convention and in accordance with generally

accepted accounting practices

2. FIXED ASSETS

Fixed assets are stated at cost, less accumulated

depreciation. Cost of acquisition of fixed assets is

inclusive of freight, duties, and taxes, incidental

expenses relating thereto, interest on direct borrowals

upto commissioning, wherever applicable, and the cost

of installation/erection, as applicable. Modvat availed, if

any, on Fixed Assets, is not included in the Cost of such

Fixed Assets capitalised.

3. LEASED ASSETS :

(A) ASSETS UNDER FINANCE LEASE:

Assets acquired under finance lease arrangement on or

after 01.04.2001 are recognised separately among the

fixed assets, at the inception of the lease at lower of their

fair value or the present value of minimum lease

payments in respect thereof. Depreciation and lease

charges on such assets are accounted for in accordance

with the Accounting Standard-19 - "Accounting for

Leases" issued by The Institute of Chartered Accountants

of India .

(B) ASSETS UNDER OPERATING LEASE :

Assets used by the Company as a lessee under operating

lease agreement are not recognised in the company's

accounts. Lease payments under operating lease are

charged to the profit and loss account on a systematic

basis representative of the pattern of the benefit accruing

to the Company from the use of the asset under operating

lease.

4. INVESTMENTS

Investments (Long Term) are stated at cost, except where

written down, in which case they are shown as their

written down values. Dividends thereon are accounted for

on accrual.

5. INVENTORIES

(a) Finished goods are valued at cost or market value,

whichever is lower.

(b) Stock of scrap -

i. In respect of Engineering Unit, purchased scrap and

internally generated scrap for use in production are

both valued at average cost of purchased scrap.

ii. In respect of other scrap, the stock of scrap is not

valued and adjusted. Sales, as and when made, are

adjusted.

(c) Work-in-Progress, raw materials, stores, spares,material in transit, are valued at cost except where thenet realisable value of the finished goods they are used inis less than the cost of finished goods and in such anevent, if the replacement cost of such materials etc., isless than their book values, they are valued atreplacement cost.

6. SALES AND OTHER EARNINGS

(a) Sales and service earnings are inclusive of exciseduty, service tax, freight, insurance etc. recoveredthereon.

(b) Despatches from Engineering Unit are in completelyknocked down condition and are invoiced at theappropriate technically evaluated values, which arematched with contracted sale prices.

(c) Power sold by the Hydroelectric Power Unit and WindPower Unit of the Company, being worked underoperating lease, to its other units is accounted at the tariffrates charged by the State Electricity Board. Suchearnings are adjusted to the power charges

7. FOREIGN EXCHANGE TRANSACTIONS

A) Transactions in foreign currency are initially accounted atthe exchange rate prevailing on the date of thetransaction, and adjusted appropriately with the differencein the rate of exchange arising on actual receipt/paymentduring the year.

B) At each Balance Sheet date

• foreign currency monetary items are reported using therate of exchange on that date

• foreign currency non-monetary items are reported usingthe exchange rate at which they were initially recognized

C) In respect of forward exchange contracts in the nature ofhedges

• Premium or discount on the contract is amortised over theterm of the contract,

• Exchange differences on the contract are recognized asprofit or loss in the period in which they arise

8. RETIREMENT BENEFITS

(a) All the employees of the Company are entitled toretirement benefits of Provident Fund, Gratuity andSuperannuation.


Annual Report 2006

Contributions to gratuity and superannuation fund are

made on the basis of demands raised by LIC, and

charged to revenue accordingly. Provident Fund

contributions are accounted for at the prescribed rates,

on accrual.

(b) The above liabilities are funded with Trusts duly

approved by Income-tax authorities (managed by

LIC)/paid to the Provident Fund Commissioner, as the

case may be.

(c ) Provision is made in the accounts for the estimated

liability as at each Balance Sheet date based on actuarial

valuation towards available leave eligible for encashment

on retirement/cessation of service of the employee, as per

the rules of the Company.

9. DEPRECIATION

Depreciation is provided in accordance with the rates

and rules prescribed under Schedule XIV to the

Companies Act, 1956, as follows:--

i. In respect of assets existing as on 30-6-1988, under the

written down value method: and

ii. In respect of assets acquired on or after 1-7-1988, under

the straight line method.

10. WARRANTY CLAIMS

Company's liability for Warranty claims and Guarantee

claims are accounted on acrual basis as per contracts,

after adjusting the claims no longer required.

11. DIVIDENDS

Provision is made in the accounts for the dividends

payable by the Company as recommended by the Board

of Directors, pending approval of the shareholders at the

Annual General Meeting. Income Tax on dividends

payable is provided for in the year to which such dividends

relate.

12. BORROWING COSTS

Borrowing costs that are directly attributable to theacquisition, construction or production of qualifying assetsare capitalised as part of the cost of that asset. Aqualifying asset is an asset that necessarily takes asubstantial period of time to get ready for its intended use.All other borrowing costs are charged to revenue in theperiod in which they are incurred.

13. EXPENDITURE ON APPROVED RESEARCH AND

DEVELOPMENT PROGRAMME

In respect of approved Research and DevelopmentProgramme, expenditure of capital nature is included inthe fixed assets and other expenditure is charged off torevenue in the year in which such expenditure is incurred.

14. TAXATION

Provision is made for income tax liability estimated toarise on the results for the year at the current rate of taxin accordance with the Income Tax Act, 1961.

In accordance with the Accounting Standard -22,Accounting for Taxes on Income, issued by the Institute ofChartered Accountants of India (ICAI), and effective from1st April 2001 and in accordance with the listingagreements with the respective stock exchanges, theCompany has recognised the deferred tax liability in theaccounts, whereby

• The net deferred tax liability arising on account of timingdifferences at 1.4.2001 has been adjusted against theGeneral Reserve as at 1.4.2001.

• Deferred tax resulting from timing differences betweenbook and tax profits is accounted for under the liabilitymethod, at the current rate of tax.

• Deferred tax assets arising on account of brought forwardlosses and unabsorbed depreciation are recognised onlywhen there is virtual certainty supported by convincingevidence that such assets will be realised. Deferred taxassets arising on other temporary timing differences arerecognised only if there is a reasonable certainty ofrealisation.





Managing Director


Chief Financial OfficerPlace : Chennai - 600 008.Date : 26th June 2006

39

THE KCP LTD. .

NOTES FORMING PART OF THE ACCOUNTS

BALANCE SHEET : 31st March,2006 31st March,2005

Rs. Rs.

1. Claims against the Company not admitted

Statutory Levies

Indirect Taxes 2,64,94,287 2,42,78,783

Direct Taxes 1,44,74,196 3,54,82,402

Contractual Levies 1,72,70,412 1,15,49,013

Others 3,71,97,678 1,97,83,576

Total 9,54,36,573 9,10,93,774

2. Estimated amount of contracts remaining to be

executed on Capital account and not provided for 9,68,03,000 4,02,73,000

3. Corporate guarantees extended

on behalf of another Company. 28,46,27,230 14,28,89,742

4. No provision has been made in accounts towards probable liability upto Jute year ended 30th June, 1998, if any, that may

arise as a result of non-compliance with the requirements of Jute Packaging Materials (Compulsory Use of Packaging

Commodities) Act,1987, consequent to differring decisions of different courts and also the representations of industry

before the Government, since the same is not ascertainable at this stage.

5. Fixed Assets include Lands.- 12.64 acres of the carrying amount of Rs.3,73,651/- at Arakkonam, 14.23 acres at the

carrying amount of Rs.4,62,475/- at Macherla, pending transfer of title to the Company.

6. The Company has issued counter guarantees to bankers for the guarantees issued by them aggregating to US $ 3 million,

to the Company's Subsidiary for loans obtained by the said Subsidiary from its bankers, the amount of guarantee

outstanding against which as at 31st March, 2006 was US $ 3 million. The guarantees referred to herein are secured by

a second charge on all the movable and immovable assets of the Company, present and future, and by transfer and

pledge in favour of the bankers of some of the shares in Companies held as investments by the Company, the beneficial

interest in which, continues to be held by the Company. The guarantees are also counter guaranteed by another Company

and some of the Directors of this Company in their individual capacity.

7. In compliance with AS-22 "Accounting for Taxes on Income" major components of deferred tax

assets and liabilities arising on account of timing differences are :

PARTICULARS ASSETS LIABILITIES

Rs. Rs.

1. Depreciation 7,82,87,248

2. Items u/s 43 B of IT Act 24,32,807

3. Provision for Doubtful debts 13,26,433

37,59,240 7,82,87,248

Net deferred tax liability as on 31.3.2006 7,45,28,008

8. Cash and Bank balances include a. Rs.1,50,000/- (Rs.48,400/-) on account of Staff Security Deposit.b. Rs.39,99,562/- (Rs.43,59,404/- ) towards Unclaimed Dividends.c. Rs.7,00,02,073/-(Rs.3,43,86,608/-) representing Fixed Deposit Receipts lodged with Bankers as securities against

Guarantees issued by them.d. Rs.1,20,00,000/-(Rs. Nil) deposited as per provisions of 58A of the Companies Act 1956 and the Rules made there under.

9. Based on the information obtained and available with the Company with regard to the status of the creditors, there are no

SSI Undertakings to whom the Company owes any sum outstanding for a period exceeding thirty days at the date of the

Balance Sheet.


Annual Report 2006

10. Pursuant to the steps taken for members voluntary liquidation of KECEPE Investment (Pte.) Limited, Singapore, a

Subsidiary of the Company, being an investment Company incorporated for holding shares in KCP Vietnam Industries

Limited and also pursuant to a share holders' resolution of the members of the said Company. KCP Limited has entered

into an agreement with KECEPE Investment (Pte) Limited for substitution of its holding in KECEPE Investment (Private)

Limited with shares of KCP Vietnam Industries Limited, of equal value and in the same proportion of holdings in KECEPE

Investments (Private) Limited.

Necessary approvals from the regulatory authorities have been obtained in this regard. The said substitution of investment

has been recognised accordingly in the accounts during the year.

PROFIT AND LOSS ACCOUNT :

11. Sale of Products and Services (including Excise Duty/Service Tax)

Quantity 31-03-2006 Quantity 31-03-2005

Rs. Rs.

Cement (MT) 529877 1,09,17,51,168 487015 92,13,52,127

Heavy Engineering Products * 80,22,52,047 66,94,52,730

Service Receipts 7,11,05,747 4,14,51,474

Others 64,81,760 66,73,911

1,97,15,90,722 1,63,89,30,242

* Unit quantification not possible

Note: (a) Sale of Products includes:

(1) Machinery and components valued at Rs.30,94,623/-(Rs.59,78,212/- ) supplied by Engineering Unit to the other

Units of the Company.

(2) Cement valued at Rs.41,63,742/- (Rs.10,62,124/-) used internally.

(3) Excise Duty Rs.31,72,15,602/- (Rs.27,46,22,509/- ) and Service Tax Rs.16,50,911/- (Rs.8,18,473/-).

(4 ) Electrical energy 773814 KWH (534694 KWH) valued at Rs.25,09,884/- (Rs.19,37,184/-) adjusted towards

wheeling and banking charges, by the buyer Electricity Company.

(b) Sale of products does not include:

Elecrical Energy generated by Hydel Unit 26368011 KWH (22362044 KWH) valued at Rs. 8,58,10,057/-

(Rs. 7,82,67,154/-) and by the Wind Power unit 3670434 KWH (206409 KWH) valued at Rs. 1,39,20,031/-

(Rs. 7,59,586/-) and consumed within the Company.

12. Raw Material Consumed: Quantity This Year Quantity Prev. Year

MT. Rs. MT. Rs.

i) Cement

Limestone 648999 8,93,81,764 585985 6,90,96,780

Laterite 23823 1,60,96,661 12618 54,08,177

Morum 0.800 1,427

Fly Ash 56522 2,85,55,350 43379 1,53,68,584

Gypsum 27335 1,69,43,923 9977 59,89,148

Iron Ore 6970 40,55,768 11095 68,00,265

Red Oxide Lumps 246 1,94,064

ii) Engineering Unit

Iron and Steel, Nickel ,

Scrap and Equipments 7196 18,82,91,295 8351 21,21,06,586

34,33,24,761 31,49,65,031

41

THE KCP LTD. .

13. Opening and Closing Stock of Finished Goods:

Opening Stock Closing Stock

Units This Year Previous year This Year Previous year

Cement (MT) 114 2,578 1,720 114

(Rs.) 1,72,496 38,21,193 27,02,502 1,72,496

Industrial Machinery Not quantifiable

and Equipment (Rs.) 2,26,24,628 7,14,59,839 98,56,131 2,26,24,628

Electrical

Energy:Hydel (KWH) 10,39,356 - 70,04,944 10,39,356

(Rs.) 17,11,196 - 86,95,965 17,11,196

Wind Power (KWH) 1,02,367 - 70,102 1,02,367

(Rs.) 3,43,953 - 2,41,335 3,43,953

Trading Goods (Qty.) - 79 - -

(Rs.) - 99,619 - -

Total (Rs.) 2,48,52,273 7,53,80,651 2,14,95,933 2,48,52,273

14. Particulars regarding Capacity and Production:

Class of Goods CAPACITY ACTUAL PRODUCTION

Licenced Installed 31-03-2006 31-03-2005

a) Electrical Energy

Hydel Power 8.25 MWH 8.25 MWH 33183700 KWH 23401400 KWH

Wind Power 2.70 MWH 2.70 MWH 3638169 KWH 308776 KWH

b) Cement 500000 TPA 531504 TPA 484551 TPA

c) Industrial Machinery and equipments. Not quantifiable Not quantifiable

15. (a) "Materials Consumed" - Cost of raw materials

(Limestone for Cement Factory) produced includes among other things

31-03-2006 31-03-2005Rs. Rs.

(a) Salaries,Wages and Bonus 73,80,831 64,27,589 (b) Contribution to Provident and other funds 11,45,132 9,84,808 (c) Workmen and Staff Welfare Expenses 10,42,004 8,44,954 (d) Stores and Spares Consumed 42,57,909 51,80,734 (e) Power and Fuel 52,44,742 51,66,769 (f) Royalty 3,29,00,251 2,55,95,952 (g) Rates and Taxes 53,05,427 1,31,976 (h) Repairs to Building and Roads 8,95,290 4,71,530 (i) Repairs to Machinery 29,96,768 62,31,521 (j) Repairs to Other Assets 83,028 79,236 (k) Insurance 2,64,511 2,18,954 (l) Lime Stone Freight 2,00,80,327 81,25,112

(b) "Power and Fuel" - includes the following expenditure incurred among other things on Generation of Power.

(a) Salaries,Wages and Bonus 8,46,322 7,54,395 (b) Contribution to Provident and other Funds 1,35,613 1,19,335 (c) Workmen and Staff Welfare Expenses 49,100 33,365 (d) Power and Fuel 3,49,101 3,04,581 (e) Stores and Spares Consumed 21,14,944 12,77,906


Annual Report 2006

31-03-2006 31-03-2005Rs. Rs. Rs.

(f) Repairs to Building and Roads 57,740 34,524 (g) Repairs to Machinery 1,325 7,044 (h) Taxes and Licences 3,100

(I) Insurance 7,12,364 2,58,489 (j) Repairs to Other Assets 12,811

16. (a) "Payment to Auditors" (net of service tax for which input credit was/to be availed by the Company) comprise :

For Statutory Audit 4,00,000 4,00,000 For Taxation matters (including tax audits) 11,25,500 1,70,000 For Certification and other services 2,95,000 2,88,940 For Company law matters 10,000 10,000 For Audit of Gratuity and Superannuation Trusts 25,000 25,000 Sales Tax Audit 15,000 Out of pocket expenses 17,421 72,353

18,72,921 9,81,293 Fees for Cost Audit 75,000 75,000 Fees for Certification and Other Services 15,000 27,500

Total 19,62,921 10,83,793(b) "Miscellaneous Expenses" include: Donations 15,00,000 Nil (c) Interest paid includes:

On Fixed Loans (includes Rs.396290/- paid to MD & 2,96,73,690 2,66,66,029 other Wholetime Directors)

To Managing Director and Other Whole-time Directors 15,69,105 4,01,125

(d) Revenue expenditure capitalised during the year Interest 46,28,670 Nil

17. Remuneration to Managing Director and Whole Time Directors:

(i) Computation of Net Profit in accordance with sec 349 of the Companies Act 1956.Profit for the year as per Profit and Loss account 24,85,10,057

Add:

Directors' sitting fee 2,00,000 Remuneration to Managing Director& Whole Time Directors 1,63,40,322 Profit on sale of Assets allowable as per sec 349 1,98,120

1,67,38,442

26,52,48,498

Less:

Profit on Sale of assets as per P & L A/c 8,77,138 8,77,138

Adjusted Net Profit for the year 26,43,71,360

(ii) Details of Remuneration to Managing Director

and other Whole Time DirectorsSalary 12,16,935 9,00,000 House Rent Allowance 4,45,645 3,60,000 Company's Contribution to Provident Fund 1,10,033 72,000 Company's Contribution to Superannuation Fund 1,37,540 90,000 Company's Contribution to Gratuity Fund 43,058 35,394 Personal Accident Insurance Premium 8,409 7,059 Medical Expenses 74,245 1,16,453 Other Perquisites 75,739 18,512 Commission 1,42,28,718 60,18,897

1,63,40,322 76,18,315

Note : (1) Commission provided to the Wholetime Directors represents the balance amount of aggregate remuneration payableto them, not exceeding 2.5% each to the Managing Director and Joint Managing Director and 1% to the Executive Directorand Technical Director, on the profits computed above, in accordance with the terms of their appointments.

43

(Contd...)

THE KCP LTD. .

(2) The cost to the company of the perquisites allowed during the year to the Whole Time Directors in addition to theremuneration paid above works out to Rs.70519/-. The value of the said perquisite computed in accordance with IncomeTax Rules 1962 ,works out to Rs.332420/-.

18. C.I.F Value of Imports made by the Company during the year 31-03-2006 31-03-2005Rs Rs

(i) Raw Materials 87,37,007 34,33,570

(ii) Components and Spare Parts 42,95,299 29,77,582

(iii) Capital Goods 96,83,293 -

19. Expenditure in Foreign Currency during the financial year on account of:

(i) Foreign Travel (excluding tickets ) 17,47,907 17,85,997

(ii) Membership 29,022 5,68,083

(iii) Commission - 1,68,230

(iv) Bank charges and Guarantee Commission - 2,89,908

(v) Interest on Foreign currency Loan 39,11,509 1,09,99,025

(vi) Tender Documents - 5,136

20. Earnings in Foreign Exchange:

(i) F.O.B. value of goods exported during the year Rs.1,66,73,463/-(Rs.8,74,56,352)

(ii) F.O.B Value of Services rendered Rs.Nil/- (Rs.23,120/- )

(iii) Guarantee commission Rs.34,73,903/- (Rs.48,20,929/-)

(iv) Interest and consultancy Rs.1,71,30,911/-(Rs.97,04,584/-)

(v) Income from subsidiary Rs.10,82,546/- (Rs.58,40,093/-)

21. Comparison between Consumption of imported and indigenous raw materials, spare parts and components during thefinancial year:

31-3-2006 31-3-2005Rs. % Rs. %

(a) Raw Materials(i) Imported 94,58,336 2.75 40,52,729 1.29 (ii) Indigenous 33,38,66,425 97.25 31,09,12,302 98.71

34,33,24,761 100 31,49,65,031 100 (b) Spare parts and

Components (debitedto respective heads)(i) Imported 78,40,556 3.90 28,20,298 1.58 (ii) Indigenous 19,30,89,110 96.10 17,62,29,768 98.42

20,09,29,666 100 17,90,50,066 100

22. Particulars disclosed pursuant to "AS-18 Related Party Disclosures" :-

A. List of Related parties:

Subsidiary Companies

M/s. KCP Vitetnam Industries Limited

M/s. KCP Bio Tech Limited

M/s. KECEPE Investments Pte. Ltd.


Annual Report 2006

Joint Venture Companies

M/s. Fives Cail KCP Limited

Key Management Personnel

Dr. V.L. Dutt- Chairman and Managing Director

Smt. V.L. Indira Dutt- Joint Managing Director

Smt. Kavitha D Chitturi - Executive Director

Sri. V.Gandhi - Technical Director

Relatives of Key Management Personnel

Smt. S.R. V.Rajyalakshmamma, Mother of Smt.V.L.Indira Dutt

Sri. V.Chandra Kumar, Brother of Smt V.L.Indira Dutt

Sri. Uma S Vallabaneni, Sister of Smt V.L.Indira Dutt

Sri. V.Rama Kumari, Sister of Smt. V.L.Indira Dutt

Sri.Sivani Dutt Chitturi Daughter of Smt.Kavita D. Chitturi

Sri. Rajeswary Ramakrishanan, Sister of Sri V.L. Dutt.

Sri. Ravi Chitturi Husband of Smt. Kavitha D. Chitturi

Companies controlled by

Key Management Personnel/Relatives

M/s. KCP Technologies Limited

M/s. V. Ramakrishna Sons Limited

M/s. The Jeypore Sugar Company Ltd.

M/s. VRK Grandsons (Private) Limited

B.Transactions with the related parties:

Subsidiary Joint Key Relatives of CompaniesCompanies Ventures Management Key Controlled

Personnel Management by KMP/Personnel relatives

of KMP

Transactions during the year Rs. Rs. Rs. Rs. Rs.

Sale of Goods 5942097 287950122 (18436047) (129295170)

Sale of Assets 5649 (25129)

Services rendered 7385678 300000 30000 122880 (8835787) (312000) (30000) (122880)

Interest Received 14432636 (10169839)

Dividends received(5840093)

Loans/Deposits Received 27500000 11500000

Commission towards CounterGuarantee 1564495

(973342)Purchase of Goods 2142506

(3501296)

45

THE KCP LTD. .

Subsidiary Joint Key Relatives of CompaniesCompanies Ventures Management Key Controlled

Personnel Management by KMP/Personnel relatives

of KMP

Transactions during the year Rs. Rs. Rs. Rs. Rs.Purchase of Assets

(162864) (78377)Services received and others

(14700) (92647)Remuneration paid 16340322

(7618315)Interest paid 1965395 898335

(159869) (401125) (1680205)Dividend paid 2599188 524331 11782005

(667573) (174777) (4857331)

Loans paid/Given 30000000 (16228336) (8015585)

Balances as at 31.03.2006

Share capital held by KCP in 264261343 4000000 (264260643) (4000000)

Loans given - 250869565 716924 (216795031)

Guarantees/Counter Guarantees 153387500 113771269 Extended (174520001) (142889742)Receivable - Trade dues 1553143 19333318 5159631

(2230656) (23469442) (4414314)Receivable - Interest 4958256

(3347137)Share capital in KCP held by 8894740 2058440 39300690

(8623960) (1747770) (48573310)Loans/Advances/Deposits received 4585984 46827148 26400000 11500000

(1524666) (19459124) (4403000) (17250000)Guarantees received 153387500

(174520000)Payable - Trade dues 32733

Payable - Interest 0 (302763)

23. Particulars disclosed pursuant to "AS-19 Accounting for Leases":-

(a) Financial Lease:

AS ON Not Later than Later than PARTICULARS 31.03.2006 One Year 1 year and

not later than

5 years

Rs. Rs. Rs.

Total minimum lease payments 16,15,557 12,95,479 3,20,078

Present value of minimum lease payments 8,54,020 7,02,949 1,51,071

- There are no material restrictions imposed under lease arrangements.

- There are no commitments for renewal or purchase of the leased assets at the end of the lease term.

(Continued)


( FOR AND ON BEHALF OF THE BOARD )Per our report annexedfor BRAHMAYYA & CO.Chartered Accountants



Managing Director




Annual Report 2006

(b) Operating Lease:- There are no minimum lease payments.- Lease payments accrue only by way of contingent rents based on the number of units of power generated from the

Wind Energy Generators for which the company has entered into a noncancellable Operating Lease Arrangement.- The leasing arrangement contains terms for renewal but not for purchase of the assets under lease and also contains

a built-in escalation provision.- There are no material restrictions imposed under the said operating lease arrangement.

24. a. The Company has 40% interest in its joint venture entity Fives Cail KCP Ltd., a Company incorporated in India.

b. The Company's share (at 40%) of the contingent liablities of Fives Cail KCP Ltd at the Balance Sheet date works outto Rs NIL (Rs.4980709/-)

c. The Interest of the Company (at 40%) in the aggregate amount of the assets, income and expenses of Fives Cail KCPLtd was as follows :

31.03.2006 31.03.2005(Rs. Thousands) (Rs. Thousands)

(a) Total Assets 108568 65192 (b) Total Liabilities 108568 65192

SOURCES OF FUNDS

(a) Paid up Share Capital 4000 4000 (b) Reserves and Surplus 11296 4434 (c) Secured Loans 69 3750 (d) Current Liabilities & Provisions 93203 53008

APPLICATIONS OF FUNDS

(a) Net Fixed Assets 790 631 (b) Current Assets 107778 64561 (c) Profit & Loss Account

PERFORMANCE OF COMPANY

(a) Turnover 268022 113001 (b) Other Income 2111 254 (c) Total Expenditure 259658 107256 (d) Profit/ (Loss) Before Tax 10475 6000 (e) Profit/ (Loss) After Tax 9142 5520

25. General:

Paise have been rounded off.Figures in brackets indicate those for the previous year.

Figures for the previous year have been regrouped, wherever necessary.

47

THE KCP LTD. .

CASH FLOW STATEMENT FOR THE YEAR ENDED 31st MARCH 2006

2006 2005

A CASH FLOW FROM OPERATING ACTIVITIES ADD LESS TOTAL

Rs. Rs. Rs. Rs.Net Profit before Tax 24,85,10,057 14,61,91,323

24,85,10,057 14,61,91,323ADJUSTMENTS FORDepreciation 5,18,68,661 4,93,70,010Foreign Exchange Difference (Net) 29,04,854 56,13,761Provision for dimunition in value of investments 0Profit/Loss on Sale/Conversion of Assets 8,77,138 -13,41,867Assets written off 14,45,402 3,259Profit/Loss on Sale of Investment 2,12,255 1,78,698Interest(Net) 2,17,26,315 3,43,71,067Dividend Received 2,67,405 -2,55,925Income from Subsidiary 10,82,546 -58,40,093Provision for dimunition in value of investments of -11,96,037earlier years withdrawn

5,35,26,318 2,68,58,258 2,66,68,060 8,09,02,87327,51,78,117 22,70,94,196

OPERATING PROFIT BEFORE WORKING CAPITAL : 1,60,34,024 -2,11,60,867Trade and other Receivables 13,35,47,954 -6,39,00,749Inventories 3,34,90,450 3,38,48,685Trade Payables & Provision 3,34,90,450 14,95,81,978 -11,60,91,528 -5,12,12,931

15,90,86,589 17,58,81,265CASH GENERATED FROM OPERATIONSDirect Taxes refunds received / paid 3,96,77,995 7,00,00,000 -3,03,22,005 -4,12,14,091

12,87,64,584 13,46,67,174CASH FLOW BEFORE EXTRAORDINARY ITEMSForeign Exchange Difference 29,04,854 -56,13,761

29,04,854 -56,13,761NET CASH FROM OPERATING ACTIVITIES....A 13,16,69,438 12,90,53,413

B CASH FLOW FROM INVESTING ACTIVITIESPurchase of Fixed Assets 6,54,55,338 -2,37,11,828Capital Work-in-Progress 60,4,24,790 -38,43,808Purchase of Investments 700 0Loan to Subsidiary Company 3,40,74,534 1,89,55,745Sale of Fixed Assets 9,96,610 34,09,262Sale of Investments 1,80,00,000 60,00,000Interest Received 6,61,11,889 1,45,31,097Dividend Received 2,67,405 2,55,925Income from Subsidiary 10,82,546 58,40,093Investments written off 9,99,999

8,64,58,450 15,99,55,362 -7,34,96,912 2,24,36,485NET CASH USED IN INVESTING ACTIVITIES B -7,34,96,912 2,24,36,485

C CASH FLOW FROM FINANCING ACTIVITIESRepayment of Long Term Borrowings (Secured) 13,13,36,941 -11,84,60,061Dividends Paid 3,86,76,348 -1,28,92,116Tax on Distributed Profits 54,24,358 -16,84,840Interest Paid 4,43,85,574 -4,89,02,164Long Term Borrowings (Unsecured) 56,31,000 3,21,92,664

13,69,67,941 8,84,86,280 4,84,81,661 -14,97,46,517NET CASH USED IN FINANCING ACTIVITIES C 48481661 -14,97,46,517

Net Increase / (Decrease) in cash and cash equivalents (A+B+C) 10,66,54,187 17,43,381Opening Cash Balance 6,40,01,313 6,22,57,932Closing Cash Balance 17,06,55,500 6,40,01,313


Per our Certificate of even date for BRAHMAYYA & CO.,Chartered Accountants

V .L. DUTT C. MURALIKRISHNA

CHAIRMAN & MANAGING DIRECTOR ICAI NO Memb.No. 20884Partner


Annual Report 2006

BALANCE SHEET ABSTRACT AND COMPANY'S GENERAL BUSINESS PROFILE(Amount in Rs. Thousands)

I. Registration Details

a. Registration No. 1128

b. State Code 18

c. Balance Sheet Date 31.3.2006

II. Capital raised during the year

a. Public Issue Nil

b. Rights Issue Nil

c. Bonus Issue Nil

d. Private Placement Nil

III. Position of Mobilisation & Deployment of Funds

a. Total Assets 2463697

b. Total Liabilities 2463697

Sources of Funds :

a. Paid-up Capital 128921

b. Reserves & Surplus 962511

c. Secured Loans 341617

d. Unsecured Loans 265520

e. Deferred Tax Liability 74528

Total 1773097

Application of Funds :

a. Net Fixed Assets 757232

b. Investments 316056

c. Net Current Assets 699809

Total 1773097

IV. Performance of Company :

a. Turnover 1973796

b. Other Income 94252

c. Total Expenditure 1819538

d. Profit Before Tax 248510

e. Profit After Tax 174965

f. Earnings Per Share in Rs. 13.57

g. Dividend Rate % 50

V. Generic Names of Three Principal Products/

Services of Company (as per monetary terms)

1. Item Code No. (ITC Code) 252321.00

Product Description Cement


Product Description Machinery & Equipment for Sugar Machinery


Product Description Machinery Equipment for Cement Machinery

(FOR AND ON BEHALF OF THE BOARD)Per our report annexedfor BRAHMAYYA & CO.Chartered Accountants


Chairman & Joint Managing Director Executive Director (ICAI Memb. No. 200884)

Managing Director

S. NANDAGOPAL V. GANDHI K. SRIDHAR

Director Technical Director Company Secretary &

Chief Financial OfficerPlace : Chennai -600 008.Date : 26th June 2006

49

THE KCP LTD. .


STATEMENT UNDER SECTION 212 OF COMPANIES ACT, 1956

IN RESPECT OF SUBSIDIARY COMPANIES

KECEPE INVESTMENTS PRIVATE LIMITED

1. During the year, the Company has been wound up and the shareholders have been allotted equal value in respective

proportions to their holdings in The KCP Limited.

KCP VIETNAM INDUSTRIES LIMITED

(wholly-owned subsidiary undertaking of The KCP Limited)

1. KECEPE Investments Pte. Limited held the entire share capital of VND 115,343,475,000 equivalent to US$ 9 million (Rs.

42,63,30,000). During the year, consequent to the winding up of the parent company, the shareholders of the parent

company have been allotted shares in The KCP Limited of equal value in respective proportion to their holding in the

parent company. The said substitution of investment has been recognized accordingly in the accounts during the year.

2. The Company earned a net profit of VND 22,422,200.00 (Rs. 6,19,71,262/-) for the year ended 31st December 2005 and

a net Loss of VND 43,948,346,000 (Rs. 12,14,65,979/-) from inception to 31st December, 2005.

3. No part of the above loss has been dealt with in the Company's accounts.

4. Holding Company's interest as mentioned above, continued to be the same as at 31st March, 2006.

KCP-BIOTECH LIMITED

1. The KCP Limited held 37,50,070 Equity Shares of Rs. 10 each representing 100% of the Share Capital.

2. The Company incurred a net loss of Rs. 279 lakhs for the current year and a net loss of Rs. 308 Lakhs from the inception

upto 31st March, 2006.

3. No part of the above loss has been dealt within the Company's accounts.


V.L. DUTT V.L. INDIRA DUTT KAVITHA D. CHITTURI

Chairman & Joint Managing Director Executive Director

Managing Director


Director Technical Director Company Secretary &

Chief Financial OfficerPlace : Chennai -600 008.Date : 26th June 2006

Annual Report 2006

STA

TE

ME

NT

PU

RS

UA

NT

TO

EX

EM

PT

ION

UN

DE

R S

EC

TIO

N 2

12(8

) O

F T

HE

CO

MP

AN

IES

AC

T,

1956 R

EL

AT

ING

TO

SU

BS

IDIA

RY

CO

MP

AN

IES

(Rs.

In lakhs)

Sl.

Natu

re o

f th

e S

ubsid

iary

Countr

yR

eport

ing

Exchange

Capita

lR

eserv

es

Tota

lTota

lIn

vestm

ents

T

urn

over

Pro

fit

/P

rovis

ion

Pro

fit

/P

roposed

No.C

om

pa

ny

Curr

ency

Rate

Assets

Lia

bili

ties

oth

er

than

(Loss)

for

(Loss)

Div

idend

Investm

ents

befo

reta

xation

after

in S

ubsid

iaries

taxation

taxation

1K

CP

Vie

tnam

Industr

ies L

td.

Vie

tnam

Vie

tnam

-

44.0

43222.5

111

7.0

59576.2

19576.2

1N

il6409.7

8520.5

60

520.5

6N

ilD

ongs

2K

CP

Bio

tech L

td.

India

Rupees

N/A

375.0

1(3

07.8

3)

888.3

7888.3

70.1

5324.2

5(2

78.6

5)

0.5

3(2

78.1

2)

Nil

Note

: I

ndia

n r

upee e

quiv

ale

nts

of

the f

igure

s g

iven in f

ore

ign c

urr

encie

s in t

he a

ccounts

of

the O

vers

eas S

ubsid

iary

Com

pany

have b

een g

iven b

ased o

n t

he e

xchange r

ate

at

year

end M

arc

h 3

1,

2006 f

or

bala

nce s

heet

item

s a

nd a

vera

ge r

ate

during t

he y

ear

2005-0

6 f

or

pro

fit

and loss a

ccount

item

s

51

THE KCP LIMITED GROUP


CONTENTS

Auditors' Report ……………………………………………………………........ 53

Balance Sheet . ……………………………………………………………........ 54

Profit and Loss Account …………………………………………………......... 55

Schedules Annexed to and forming part of the Balance Sheet ...…....... 56

Notes forming part of the Accounts …………………………………............ 65

Cash Flow Statement ……………………………………………………......... 68

Segment Reporting ....……………………………………………………......... 69

Page No.

Annual Report 2006

To

The Board of Directors

The KCP Limited

Chennai

1. We have examined the attached consolidated Balance

Sheet of The KCP Limited, its subsidiaries, and its Joint

venture as at March 31, 2006, the consolidated Profit and

Loss Account and the consolidated Cash flow statement for

the year then ended. These consolidated financial

statements are the responsibility of The KCP Limited's

management. Our responsibility is to express an opinion on

these financial statements based on our audit.

2. We conducted our audit in accordance with generally

accepted auditing standards in India. These Standards

require that we plan and perform the audit to obtain

reasonable assurance whether the financial statements are

prepared, in all material respects, in accordance with an

identified financial reporting framework and are free of

material misstatements. An audit includes, examining on a

test basis, evidence supporting the amounts and

disclosures in the financial statements. An audit also

includes assessing the accounting principles used and

significant estimates made by management, as well as

evaluating the overall financial statements. We believe that

our audit provides a reasonable basis for our opinion.

3. We did not audit the financial statements of one of the two

of the subsidiaries, viz, KCP Vietnam Industries Ltd, whose

accounts were audited by other auditors. Our opinion,

insofar as it relates to the amounts included in the

consolidate statements referred to above, in respect of

KCP Vietnam Industries Limited, is based solely on the

reports of the other auditors, and on the information and

explanations for the purpose of the consolidation referred

to herein, furnished to us by the KCP Limited.

4. We report that the consolidated financial statements have

been prepared by the Company in accordance with the

requirements of Accounting Standard 21 "Consolidated

Financial Statements", issued by the Institute of Chartered

Accountants of India and on the basis of the separate

audited/unaudited financial statements of The KCP Limited,

its joint venture and its subsidiaries, as explained in

paragraph 3 above, included in the consolidated financial

statements.

5. On the basis of the information and explanations given to

us and on consideration of separate audit reports,

wherever furnished to us, on the individual audited/

unaudited financial statements of The KCP Limited, its joint

venture and its aforesaid subsidiaries as explained in

paragraph 3 above, in our opinion, the consolidated

financial statements give a true and fair view in conformity

with the accounting principles generally accepted in India:

a) in the case of the Consolidated Balance Sheet of the

consolidated state of affairs of The KCP Limited, its joint

venture and its subsidiaries as at March 31, 2006;

b) in the case of the Consolidated Profit and Loss Account, of

the consolidated results of operations of The KCP Limited,

its joint venture and its subsidiaries for the year then ended,

and

c) in the case of the consolidated Cash flow statement of the

consolidated cash flows of The KCP Limited, its joint

venture and its subsidiaries for the year ended on that date.

for BRAHMAYYA & CO


CAMP: Chennai

DATE :26th June 2006

C.MURALIKRISHNA

(ICAI Memb.No.20884)

Partner

AUDITOR’S REPORT TO THE DIRECTORS OF THE KCP LIMITED

53

THE KCP LTD. .THE KCP LIMITED GROUP

BALANCE SHEET AS AT 31st MARCH 2006

AS AT AS ATPARTICULARS Schedule 31-03-2006 31-03-2005

Rs. Rs. Rs. Rs.(I) SOURCES OF FUNDS:

1. Shareholders' Funds:(a) Capital A 12,89,21,160 12,89,21,160(b) Reserves & Surplus B 92,19,05,232 78,46,04,331

1,05,08,26,392 91,35,25,491

2. Minority Interest C 10,26,68,303 7,40,76,395

3. Loan Funds:(a) Secured Loans D 70,21,25,820 60,68,67,766(b) Unsecured Loans E 34,55,30,001 36,08,75,000

1,04,76,55,821 96,77,42,7664. Deferred Tax Liability (Net) See note 8

(a) Deferred Tax Liability 7,82,87,248 8,04,33,212(b) Less: Deferred Tax Asset 37,59,240 7,45,28,008 36,42,885 7,67,90,327

Total 2,27,56,78,524 2,03,21,34,979(II) APPLICATION OF FUNDS:

1. Fixed Assets:(a) Gross Block F 2,72,08,72,425 2,66,37,44,603(b) Less: Depreciation 1,35,29,74,806 1,25,72,52,219

(c) Net Block 1,36,78,97,619 1,40,64,92,384(d) Capital Work-in-Progress 7,11,60,271 1,82,29,775

1,43,90,57,890 1,42,47,22,159

2. Investments G 4,78,70,969 6,58,37,145

3. Current Assets,Loans and Advances

(a) Inventories H-1 75,05,49,701 56,51,44,603(b) Sundry Debtors H-2 23,00,12,940 16,22,21,130(c) Cash and Bank Balances H-3 22,60,01,863 16,17,76,050(d) Other Current Assets H-4 25,83,718 20,81,935(e) Loans and Advances H-5 38,66,19,566 27,19,49,838

1,59,57,67,788 1,16,31,73,556Less: Current Liabilities and Provisions :(a) Liabilities I-1 58,04,85,972 51,21,43,029(b) Provisions I-2 22,66,18,000 10,95,69,317

80,71,03,972 62,17,12,346

Net Current Assets 78,86,63,816 54,14,61,210

5. Preliminary Expenses ( to the extent Not written off) 85,848 1,14,464

Total 2,27,56,78,524 2,03,21,34,979

Notes , Schedules & Statement on Accounting Policies form an integral part of the Balance Sheet( FOR AND ON BEHALF OF THE BOARD)


Chairman & Managing Director Joint Managing Director Executive Director Partner


Director Technical Director Company Secretary & Chief Financial Officer

Place : Chennai -600 008.Date : 26th June 2006



Annual Report 2006

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31st MARCH 2006

For the For theParticulars Schedule year ended year ended

31.03.2006 31.03.2005

Rs RsINCOME FROM:

Sale of Products and ServicesGroup compnaies (including Excise dutyrecovered Rs.31,72,15,602/- (Rs.27,46,22,509/-) and 2,53,20,20,422 2,19,19,64,476

Service Tax Rs.16,50,911/- (Rs.8,18,473/-)Joint venture (including Excise duty 26,77,48,597 11,26,68,782recovered Rs.8,67,289/- (Rs.8,14,527/-) and Service Tax Rs.2,83,474/-(Rs.3,32,231/-)Other Income 1

Group Companies 8,16,36,027 5,54,73,073

Joint venture 21,10,866 2,54,417

2,88,35,15,912 2,36,03,60,748EXPENDITURE ON:

Materials Consumed 2 79,28,70,006 59,78,97,656Payments and Benefits to Employees 3 22,57,29,833 19,45,43,309Manufacturing,Selling,Administrative and other expenses 4 1,00,46,49,379 85,54,17,787Excise Duty and Taxes (excluding Income-Tax) 5 32,63,49,086 28,08,19,786Interest & Finance ChargesGroup Companies 9,07,35,480 6,79,16,846Joint Venture 86,081 10,00,205DepreciationGroup Companies 12,59,78,755 12,20,35,774Joint Venture 3,11,909 1,58,062

2,56,67,10,528 2,11,97,89,425Profit for the year: 31,68,05,383 24,05,71,323Add: Income Tax Refunds 56,92,257Less: Minority Share of Profit / (Loss) 2,85,62,104 3,04,68,867Less: Provision for Taxation-CurrentGroup Companies 8,15,53,325 5,25,00,000Joint Venture 13,32,943 4,80,000Less: Provision for Taxation-deferred -22,62,320 -30,61,279Add: Excess provision for tax withdrawn Profit after Taxation 21,33,11,588 16,01,83,735

Balance brought forward from last Year 44,79,51,542 35,30,06,551

66,12,63,130 51,31,90,286This Year Previous Year

Rs. Rs.

Add: Investmentment Allowance (utilised) withdrawn - 8,88,95,000 - 8,88,95,000

Less: Transfer to General Reserve 12,59,14,181 11,00,00,000 12,59,14,181 11,00,00,000

53,53,48,949 49,20,85,286

Less: Proposed Dividend 6,64,60,580 3,86,76,348 6,64,60,580 3,86,76,348

Tax on distributed Profits 93,21,096 54,57,396 93,21,096 54,57,396(see Directors' Report)

Balance carried forward to next Year 45,95,67,273 44,79,51,542

Basic Earnings per Equity Share of Rs.10 each (EPS) 16.55 12.42 Net Profit after Tax Rs. 21,33,11,588/- (Rs.16,01,83,735)/No.of Equity Shares 12892116 (12892116)

Notes , Schedules & Statement on Accounting Policies form an integral part of the Profit and Loss Account( FOR AND ON BEHALF OF THE BOARD)




Director Technical Director Company Secretary & Chief Financial OfficerPlace : Chennai -600 008.

Date : 26th June 2006


55


Schedule 'A'

"Share Capital"AS AT AS AT

PARTICULARS 31.03.2006 31.03.2005

Rs. Rs.Authorised:

50000000 Equity Shares of Rs.10/-each 50,00,00,000 50,00,00,000Issued:

12897748 Equity Shares of Rs.10/-each 12,89,77,480 12,89,77,480Subscribed and Paid-up:

12892116 Equity Shares of Rs.10/-each fully paid 12,89,21,160 12,89,21,160


Schedule 'B'

"Reserves & Surplus"

AS AT Added during Withdrawn during AS AT

PARTICULARS 31.03.2005 The Year The Year 31.03.2006

Rs. Rs. Rs. Rs.Group CompaniesCapital Reserve - 3,83,73,469 - - 3,83,73,469General Reserve

- Group Companies 30,00,00,000 12,50,00,000 - 42,50,00,000- Joint venture 44,13,360 9,14,182 - 53,27,542Foreign Project reserve- Joint venture 43,20,000 - - 43,20,000Translation reserve -1,04,54,040 - - -1,06,83,052Surplus (i.e) Balance inProfit and Loss Account 44,79,51,542 - - 45,95,67,273

Total taken to Balance Sheet 78,46,04,331 12,59,14,182 92,19,05,232

Schedule 'C'

Minority Interest

AS AT AS AT

PARTICULARS 31.03.2006 31.03.2005

Rs. Rs.Share capital IN KCPVIL 11,85,71,834 11,85,71,834

4819922 Equity shares (4819922 shares ) held by

minority in KCPVI Limited

Share capital in KCP BIOTECH - 700

7 shares held by minority in KCP Biotech Limited

Deficit in Profit and Loss Account -1,05,62,005 -3,91,24,109

Translation Reserve -53,41,526 -53,72,030


Schedules annexed to and forming part of the Balance Sheet


Annual Report 2006

Schedule 'D'

"Secured Loans"AS AT AS AT

PARTICULARS 31.03.2006 31.03.2005Rs. Rs.

I.Short-Term Loans:

a) Working capital loans from Banks

- Group companies 42,45,04,908 423389114

- Joint Venture 3640000

II. Long-Term Loans :

From Financial institutions 27,75,51,803 179729052

- Joint Venture 69,109 109600

Total taken to Balance Sheet 70,21,25,820 606867766

Schedule 'E'

"Unsecured Loans"AS AT AS AT

PARTICULARS 31.03.2006 31.03.2005Rs. Rs.

1. Fixed Deposits 23,91,20,000 25,98,89,0002. Intercorporate Loans 10,64,10,001 10,09,86,000


Schedule 'G'

"Investments"AS AT AS AT

PARTICULARS 31.03.2006 31.03.2005Rs. Rs..

1. Trade Investments:(a) Quoted Equity Shares - Fully paid 1 1(b) Unquoted Equity Shares - Fully paid: 3,60,00,000 5,40,00,000

2. Non-Trade Investments:(a) Quoted Equity Shares -Fully Paid: 12,08,507

Less : Provision for shortfall in Value & Investments 2,172 12,06,335 12,06,335

(b) Unquoted Equity Shares - Fully Paid: 50,00,002 50,00,0023. Investmensts in Unit Trust of India 4. Other Investments 56,64,631 56,30,807


Schedule 'H-1'

"Current Assets"

Inventories(as certified by the Managing Director.)

AS AT AS ATPARTICULARS 31.03.2006 31.03.2005

Rs. Rs.(1) Stores and Spares

- Group Companies 25,27,37,144 18,33,56,733

- Joint Venture 38,99,953 78,60,305

a) Raw Materials 5,14,99,547 3,16,98,532b) i) Finished Goods at Cost

- Group Companies 18,46,18,630 12,15,47,114- Joint Venture 0 58,95,445

ii) Finished Goods at Market Value

- Group Companies 9,58,012 1,48,73,692

c) Work-in-progress 25,68,36,415 19,99,12,782Total taken to Balance Sheet 75,05,49,701 56,51,44,603

57


58

Sch

ed

ule

'F

'

"Fix

ed

As

se

ts"

GR

OS

S B

LO

CK

D

EP

RE

CIA

TIO

NN

ET

TB

LO

CK

Serial

C

ost

upto

Additio

ns

Deductions

Exchange

Cost

upto

Tota

l Tota

lA

s a

tA

s a

tN

o.

DE

SC

RIP

TIO

N

31.0

3.2

005

during t

he

during t

he

diff

ere

nce

31.0

3.2

006

Exchange

Depre

cia

tion

Depre

cia

tion

31.0

3.2

006

31.0

3.2

005

year

year

year

diff

ere

nce

upto

upto

31.0

3.2

005

31.0

3.2

006

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

Rs.

1

Lands

- G

roup C

om

panie

s27964042

509830

28473872

28473872

27964042

2.

(a)

Build

ings

- G

roup C

om

panie

s209279775

2773520

212053295

73488168

78255209

133798086

135791607

(b)

Leasehold

Build

ings

- G

roup C

om

panie

s1547500

1547500

38711

8412342

1135158

1160382

3

T

ram

ways &

Railw

ay S

idin

gs

- G

roup C

om

panie

s7012866

7012866

4789321

511

2053

1900813

2223545

4

P

lant

& M

achin

aries

Ow

ne

d

- G

roup C

om

panie

s2303318378

69203820

27148737

96911

45

2355064606

-1920937

1088924426

1193986717

1161077889

1214393952

Leased

- G

roup C

om

panie

s803107

803107

762951

762951

40156

40156

5

F

urn

iture

,Fix

ture

s &

Offic

e E

quip

ments

A)

Ow

ned

- G

roup C

om

panie

s40833502

1770819

782952

41821369

31454694

27035651

14785718

9378808

- J

oin

t V

entu

re11

54922

336703

12852

1478772

734671

950445

528328

420251

B)

Leased

- J

oin

t V

entu

re128932

128932

46778

72388

56544

82154

6

V

echic

les &

Eart

hm

ovin

g E

quip

ments

A)

Ow

ned

- G

roup C

om

panie

s59872898

7935052

6722268

61085682

49162424

38638774

22446908

10710474

- J

oin

t V

entu

re160909

141712

28026

274594

32035

69952

204643

128874

B)

Leased

- G

roup C

om

panie

s8022630

539942

7482688

4528608

5996716

1485972

3494022

7

R

esearc

h &

Develo

pm

ent

Equip

ments

- G

roup C

om

panie

s1484225

1484225

780108

781609

702616

70411

7

8

P

ate

nts

- G

roup C

om

panie

s2160916

2160916

2160917

900000

1260916

Gra

nd T

ota

l2663744602

82671455

35234777

96911

45

2720872425

-1920937

1257252220

1352974806

1367897619

1406492384

1.

Gro

up C

om

panie

s2662299840

82193041

35193899

96911

45

2718990127

-1920937

1256438735

1351882022

1367108105

14058611

05

2

Join

t V

entu

re1444762

478414

40878

1882298

813485

1092784

789514

631279

Gra

nd T

ota

l2663744602

82671455

35234777

96911

45

2720872425

-1920937

1257252220

1352974806

1367897619

1406492384

Annual Report 2006

Annual Report 2006

Schedule 'H-2'

"Sundry Debtors"

AS AT AS AT

PARTICULARS Details 31.03.2006 31.03.2005

Rs. Rs. Rs.

Sundry Debtors(A) Debts outstanding for a period exceeding six months:

Considered Good (a) Fully Secured- Group Companies 26,86,282 25,83,813

(b) Unsecured- Group Companies 62,81,291 4,67,127- Joint venture 1,46,02,380 98,06,407

2,35,69,953 1,02,73,534Considered Doubtful

- Group Companies 0 5,22,405- Joint Venture 0 10,93,346

16,15,7512,35,69,953 1,44,73,098

Less: Provision for doubtful debts- Group Companies 0 5,22,405- Joint Venture 0 10,93,346

2,35,69,953 1,28,57,347(B) Other Debts-Considered Good

(a) Fully Secured- Group Companies 41,11,773 46,76,934

(b) Unsecured- Group Companies 16,81,36,593 12,90,67,622- Joint Venture 3,41,94,621 1,56,19,227

20,64,42,987 14,93,63,783Total taken to Balance Sheet 23,00,12,940 16,22,21,130

Schedule 'H-3'

"Cash and Bank Balances"

AS AT AS AT


Rs. Rs. Rs.

(1) Cash /Cheques on hand- Group Companies 1,03,98,199 1,34,44,789- Joint venture 13,034 1,04,11,233 4,663

(2) At Scheduled Banks:i) in Fixed Deposits

- Group Companies 11,87,37,546 3,00,65,334- Joint venture 1,54,39,103 13,41,76,649 20,35,473

ii) in Current Accounts- Group Companies 8,12,66,942 6,00,76,114- Joint venture 1,47,039 8,14,13,981 98,34,085

iii) in Other Banks: 4,63,15,592


Schedule 'H-4'

"Other Current Assets"

AS AT AS AT


Rs. Rs. Rs.Interest accrued

- Group Companies 25,56,027 20,57,202- Joint Venture 27,691 24,733

Total taken to Balance Sheet 25,83,718 20,81,935

59


Schedule "H-5"

"Loans And Advances"

AS AT AS AT


Rs. Rs. Rs.

(1) Advances, ( unsecured , recoverable in cash or in kind , for value to be received )Considered Good - Group Companies 9,16,74,788 5,93,34,464- Joint Venture 2,85,10,213 1,12,14,368

Considered Doubtful 37,36,597 34,18,27812,39,21,598 7,39,67,110

Less : Provision for Doubtful Advances 37,36,598 34,18,27812,01,85,000 7,05,48,832

(2) Prepaid Expenses- Group Companies 1,15,91,632 1,59,47,878- Joint Venture 6,64,421 1,22,56,053 2,65,431

(3) Excise Duty paid in advance- Group Companies 4,31,64,846 1,48,32,761- Joint Venture 6,46,879 4,38,11,725 1,98,607

(4) Income-tax / Wealth -tax paid in advance- Group Companies 15,54,79,071 12,47,23,020- Joint Venture 43,11,376 15,97,90,447 9,87,148

(5) Income-tax deducted at source- Group Companies 74,79,438 21,67,900- Joint Venture 74,79,438 2,98,022

(6) Deposits recoverable- Group Companies 3,22,66,478 3,93,26,565- Joint Venture 15,534 3,22,82,012 2,15,534

(7) Claims recoverable- Group Companies 1,07,28,097 24,38,139- Joint Venture 86,794 1,08,14,891


Schedule "I-1"

"Current Liabilities and Provisions"

AS AT AS AT


Rs. Rs. Rs.

A. CURRENT LIABILITIES:

(1) Sundry Creditors- Group Companies 24,30,50,546 22,73,66,826- Joint Venture 2,85,50,681 27,16,01,227 1,49,18,002

(2) Advances received against sales- Group Companies 19,63,17,222 17,33,70,760- Joint Venture 6,01,45,414 25,64,62,636 3,43,90,963

(3) Trade Deposits 3,60,30,000 3,59,25,000(4) Security Deposits from staff and others

- Group Companies 14,03,764 16,01,633- Joint Venture 8,040 14,11,804 2,000

(5) Interest accrued but not due on loans- Group Companies 47,78,824 88,86,954- Joint Venture 214 47,79,038 75

(6) Due to Superannuation and Gratuity Trusts(NET) 63,33,146 88,06,643(7) Unclaimed dividend 38,68,122 43,03,961(8) Other Liabilities

- Joint venture 25,70,212



Annual Report 2006

Schedule "I-2"

PROVISIONS:

AS AT AS AT


Rs. Rs. Rs.

(1) for Income Tax & Wealth Tax

- Group Companies 13,82,59,480 5,66,92,891

- Joint Venture 20,78,565 14,03,38,045 7,45,623

(2) for Proposed Dividend 6,64,60,580 3,86,76,348

(3) for Tax on Dividend 93,21,096 54,24,358

(4) for Leave Encashment

- Group Companies 99,99,233 76,46,585

- Joint Venture 4,99,046 1,04,98,279 3,83,512


Signature to Schedules A to I-2( FOR AND ON BEHALF OF THE BOARD)




Director Technical Director Company Secretary & Chief Financial Officer

Place : Chennai -600 008.Date : 26th June 2006


61


Schedule-1

“Other Income"

For the For thePARTICULARS Details year ended year ended

31.03.2006 31.03.2005Rs. Rs. Rs.

(1) Interest received from Banks and others- Group Companies 6,06,86,098 77,28,498- Joint Venture 5,17,168 6,12,03,266 1,10,045

(2) Dividends Received (Gross) 2,67,405 2,55,925(3) Rents received 10,96,944 10,42,813(4) Miscellaneous Receipts

- Group Companies 80,10,521 29,05,986- Joint Venture

(5) Profit on sale of Assets- Group Companies 8,77,138 13,41,867- Joint Venture 14,584 8,91,722 7,252

(6) Unclaimed balances credited back 5,52,421 63,33,837(7) Claims/refunds received

- Group Companies 7,64,952 2,93,55,920- Joint Venture 1,88,080

(8) Profit on Sale of Investments 9,53,032(9) Provision no longer required credited back

- Group Companies 63,31,337 40,08,227- Joint Venture 11,71,767 75,03,104 1,37,120

(10) Bad debts recovered 25,00,000(11) Difference in Exchange (Net) 32,68,478


Schedule-2Materials Consumed

For the For thePARTICULARS Details year ended Details year ended

31.03.2006 31.03.2005Rs. Rs. Rs. Rs.

Opening Stocks:Raw materials

- Group Companies 1,45,63,220 65,85,275- Joint Venture 78,60,305 99,01,979

Work-in-Progress- Group Companies 19,20,52,477 9,87,10,164

Finished goods- Group Companies 13,14,24,398 15,54,72,156- Joint Venture 58,95,445 Nil

35,17,95,845 27,06,69,574ADD:

i) Purchases:Raw materials & Components- Group Companies 12,55,67,606 24,71,84,650- Joint Venture 22,48,78,070 8,91,27,621

ii) Cost of raw materials produced - Group Companies 55,39,77,367 34,27,11,656

90,44,23,043 67,90,23,9271,25,62,18,888 94,96,93,501

LESS:Closing Stocks: Raw materials

- Group Companies 2,09,35,825 1,45,63,220- Joint Venture 78,60,305

Work-in-Progress- Group Companies 25,68,36,415 19,20,52,477

Finished goods - Group Companies 18,55,76,642 13,14,24,397- Joint Venture 58,95,445

46,33,48,882 35,17,95,845Total taken to Profit and Loss Account 79,28,70,006 59,78,97,656

SCHEDULES ANNEXED TO AND FORMING PART OF PROFIT AND LOSS ACCOUNT


Annual Report 2006

Schedule-3"Payments and Benefits to Employees"


31.03.2006 31.03.2005Rs. Rs. Rs.

Salaries, Wages and Bonus- Group Companies 17,48,92,963 15,11,98,229- Joint Venture 57,62,748 38,39,404

Contribution to Provident Fund and FamilyPension Scheme

- Group Companies 1,13,39,331 1,02,10,990- Joint Venture 3,28,564 2,48,087

Contribution to Superannuation Funds- Group Companies 53,23,652 49,07,972- Joint Venture 2,71,306 2,96,667

Contribution to Gratuity Funds- Group Companies 56,23,993 44,95,198- Joint Venture 4,97,168 66,992

Workmen and Staff Welfare expenses- Group Companies 2,11,14,536 1,86,89,852- Joint Venture 5,75,572 5,89,918


Schedule-4"Manufacturing ,Selling, Administrative And Other Expenses"


31.03.2006 31.03.2005Rs. Rs. Rs.

Manufacturing: Stores and Spares (including Packing Materials) consumed.

- Group Companies 20,14,19,593 16,26,55,473- Joint Venture 9,38,947 33,36,091

Sub-contracted works- Group Companies 5,48,88,654 4,80,94,720- Joint Venture 24,14,555 12,46,443

Power and Fuel- Group Companies 46,89,41,643

Less:Self consumption of Power generated internally 9,99,10,467 36,90,31,176 31,43,69,688Insurance

- Group Companies 62,93,936 53,82,031- Joint Venture 1,07,055 15,936

Research & Development - Group Companies 3,97,424 3,65,134

Technical fee and royalty- Group Companies 25,09,884- Joint Venture 6,06,752 2,42,258

Lease Rentals- Group Companies 1,23,85,000 10,37,487

Joint Venture 1,36,254 46,375Repairs to Buildings

- Group Companies 1,98,88,427 1,44,34,678Repairs to Machinery

- Group Companies 3,27,23,644 42,178,115Repairs to Other Assets

- Group Companies 92,37,500 85,67,784(A) 71,29,78,800 60,19,72,213

Selling:Advertisement

- Group Companies 57,12,448 82,81,921- Joint Venture 1,62,730 29,652

Loading,Unloading,Transport etc- Group Companies 16,34,98,658 8,29,15,210- Joint Venture 36,91,952 24,25,096

Commission on Sales- Group Companies 22,31,676 45,67,013- Joint Venture 68,08,902 26,75,640

(B) 18,21,06,365 10,08,94,532Administrative:

Rent- Group Companies 14,43,669 13,52,232- Joint Venture 1,36,254 29,652

63


Signature to Schedules 1 to 5( FOR AND ON BEHALF OF THE BOARD )




Director Technical Director Company secretary & Chief Financial OfficerPlace : Chennai -600 008.




31.03.2006 31.03.2005Rs. Rs. Rs.

Payments to Auditors - Group Companies 21,94,081 13,19,160- Joint Venture 72,620 70,600

Directors' Sitting Fee - Group Companies 2,28,750 3,69,795

Managerial Remuneration - Group Companies 1,63,40,322 76,18,315- Joint Venture 5,24,081 3,57,931

Miscellaneous Expenses- Group Companies 6,78,07,805 6,69,45,500- Joint Venture 83,03,930 44,70,295

(C) 9,70,51,511 8,25,33,480Other Items:

Warranty Claims- Group Companies 34,58,553 84,33,371- Joint Venture 12,83,100

Provision for doubtful debts- Group Companies 3,46,935 43,491

Bad debts and irrecoverable advances written off- Group Companies 10,53,508 6,83,393- Joint Venture

Discarded assets written off- Group Companies 16,31,619 3,259

Loss on sale of assets- Group Companies 27,51,570 4,74,24,081- Joint Venture

Investments written off- Group Companies 0 9,99,999

Short fall in value of Investments- Group Companies

Difference in exchange (NET)- Group Companies 0 1,23,81,200- Joint Venture 0 48,769

Bad debts written off- Joint Venture 19,87,418

(D) 1,25,12,702 7,00,17,563

Totals of A+B+C+D taken to Profit and Loss Account 1,00,46,49,379 85,54,17,787

Schedule-5Duty & Taxes (Excluding Income tax)"


31.03.2006 31.03.2005Rs. Rs. Rs.

Excise Duty and Cess- Group Companies 31,80,03,021 27,12,74,041- Joint Venture 9,33,622 6,58,042

Rates and Taxes- Group Companies 73,30,005 88,72,032- Joint Venture 82,439 15,671


( Continued)


Annual Report 2006

1. Basis of preparation

The KCP Limited (Parent) has prepared the group consolidated financial statements by :

Consolidating its accounts and those of its subsidiaries viz. KCP Vietnam Industries Ltd, KCP Biotech Limited, in accordancewith "Accounting Standard 21Consolidated Financial Statements" issued by the Institutue of Chartered Accountants of India.

1.1 Companies included in consolidation

Consequent to the voluntary liquidation of KECEPE Investments Pvt. Ltd., Singapore, in which The K.C.P. Limited held 66.67%of the Equity Capital, the said holding has been substituted by shares of equivalent carrying amount in KCP Vietnam IndustriesLtd. The financial statements of KCP Vietnam Industries Limited, prepared for the year ended 31st March, 2006, have beenconsidered for the purposes of these consolidated accounts.

KCP Biotech limited is 100% subsidiary of the K.C.P Limited and Fives Cail KCP Limited a company incorporated in India, is ajoint venture entity in which The KCP Limited has a 40% interest. The reporting date of these two entities is 31st March.

1.2 Principles of consolidation

The financial statements of the KCP Ltd and its subsidiries are prepared according to the accounting policies and standardsapplicable to them in the countries in which they are incorporated as stated in the "Statements on Accounting Policies" in therespective companies and published separately here along with. It is not practicable to use uniform accounting policies inpreparing the consolidated financial statements.

1.3 FOREIGN EXCHANGE TRANSACTIONS

A) Transactions in foreign currency are initially accounted at the exchange rate prevailing on the date of the transaction, andadjusted appropriately with the difference in the rate of exchanges arising on actual receipt/payment during the year.

B) At each Balance Sheet date

- foreign currency monetary items are reported using the rate of exchanges on that date- foreign currency non-monetary items are reported using the exchange rate at which they were initially recognized

C) In respect of forward exchange contracts in the nature of hedges

a. Premium or discount on the contract is amortised over the term of the contract,b. Exchange differences on the contract are recognized as profit or loss in the period in which they arise

D) In consolidating the transactions of the non-integral foreign operations of the group, in the group financial statements,

All the assets and liabilities of such operations are translated at the exchange rate on the date of the Balance Sheet Incomeand expenses of such operations are translated at the yearly average rates

The resulting exchange differences are accumulated in a foreign currency translation reserve until the disposal of theinvestment in such operations

2. Major components of deferred tax assets and liabilities arising on account of timing differences are

PARTICULARS ASSETS LIABILITIES

Rs. Rs.1. Depreciation 7,82,87,2482. Items U/s 43 B of IT Act 24,32,8073. Provision for Doubtful Debts 13,26,433

37,59,240 7,82,87,248

Net deferred tax liability as on 31.03.2006 7,45,28,008

Deferred Tax asset arising on account of unabsorbed loss incurred in Vietnam is not taken into account, as a prudent measure.

NOTES FORMING PART OF THE ACCOUNTS

65


3. Movement in Translation Reserve KCP Ltd Minority Total

Rs. Rs. Rs.

Opening Balance (Cr) -1,04,54,040 -53,72,030 -1,58,26,070Movement due to Non - Monetary items-Capital, Reserves, Opening Stock etc. -2,29,012 30,504 -1,98,508(Dr)Closing Balance(Dr) -1,06,83,052 -53,41,526 -1,60,24,578

4. Particulars disclosed pursuant to "AS-18 related party disclosures" :-

A. List of Related parties:

Key Management Personnel

Dr. V.L. Dutt- Chairman and Managing Director, The K C P LtdSmt. V.L. Indira Dutt- Joint Managing Director, The K C P LtdSmt. Kavitha D Chitturi - Executive Director, The K C P LtdSri. N.Radhakrishana Rao- Director and President, Fives Cail KCP Ltd

Relatives of Key Management Personnel

Smt.S.R. V.Rajyalakshmamma, Mother of Smt.V.L.Indira DuttSri. V.Chandra Kumar, Brother of Smt V.L.Indira DuttSmt.Uma S Vallabaneni, Sister of Smt V.L.Indira DuttSmt.V.Rama Kumari, Sister of Smt. V.L.Indira DuttKum.Shivani Dutt Chitturi, Daughter of Smt.Kavitha Dutt ChitturiSmt. Rajeswari Ramakrishanan, Sister of Dr. V.L. Dutt.

Companies controlled by

Key management Personnel/Relatives

M/s. KCP Technologies LimitedM/s. V. Ramakrishna Sons LimitedM/s. The Jeypore Sugar Company Ltd.M/s. VRK Grandsons (Private) Limited

B. Transactions with the related parties:Companies

Key management Relatives of Controlledpersonnel Key management by KMP/

Personnel relatives of KMP

Transactions during the year Rs. Rs. Rs.

Services rendered 30000 122880 (30000) (122880)

Interest ReceivedLoans / Deposits Received 27500000 0 11500000

0 Services received and others 0 0 0

0 (14700) (92647)Remuneration paid 16789815

(7976246)Interest paid 1965395 0 898335

(401125) 0 (1680205)Dividend paid 2599188 524331 11782005

(667573) (174777) (4857331)Loans paid/Given 0 0

0 (8015585)Balances as at 31.03.2006

Receivable - Trade dues 0 5159631 (4414314)

Share capital in KCP held by 8894740 2058440 39300690 (8623960) (1747770) (48573310)

Loans/Advance/Deposits received 26400000 0 11500000 (4403000) 0 (17250000)

Guarantees received 153387500 (174520000)

Payable - Trade dues 32733 Payable - Interest 0

(302763)


Annual Report 2006

5. Particulars disclosed pursuant to "AS-19 Accounting for Leases":-(a) Finance Leases :

PARTICULARS AS ON Not Later than Later than 1 year and31.03.2006 One Year not later than 5 years

Rs. Rs. Rs.

Total minimum lease payments 16,15,557 12,95,479 3,20,078Present value of minimum lease payments 8,54,020 7,02,949 1,51,071

-There are no material restrictions imposed under lease arrangements.-There are no commitments for renewal or purchase of the leased assets at the end of the lease term.

(b) Operating Lease:There are no minimum lease payments.Lease payments accrue only by way of contingent rents based on the number of units of power generated from the

Wind Energy Generators for which the company has entered into a noncancellable Operating Lease arrangement.

The leasing arrangement contains terms for renewal but not for purchase of the assets under lease and also contains a built-in escalation provision.

There are no material restrictions imposed under the said operating lease arrangement.

6. Claims against the Company not admitted 31st March,2006 31st March,2005

Statutory Levies :- Rs. Rs.

Indirect Taxes

Group Companies 2,64,94,287 2,42,78,783

Joint Venture 0 2,64,94,287 49,80,709

Direct Taxes

Group Companies 1,44,74,196 3,54,82,402

Joint Venture 0 1,44,74,196

Contractual Levies 1,72,70,412 1,15,49,013

Others 3,71,97,678 1,97,83,576

Total 9,54,36,573 9,60,74,483

7. General:

Paise have been rounded off.Figures in brackets indicate those for the previous year.Figures for the previous year have been regrouped, wherever necessary.





Director Technical Director Company Secretary & Chief Financial OfficerPlace : Chennai -600 008.



67


Per our Certificate of even datefor BRAHMAYYA & CO.,


V .L. DUTT C. MURALIKRISHNA

CHAIRMAN & MANAGING DIRECTOR ICAI NO Memb.No. 20884Partner



CASH FLOW STATEMENT FOR THE YEAR ENDED 31st MARCH 2006

PARTICULARS 2006 2005

A CASH FLOW FROM OPERATING ACTIVITIES ADD LESS TOTAL

Rs. Rs. Rs. Rs.

Net Profit before Tax 31,68,05,383 24,05,71,323

31,68,05,383 24,05,71,323

ADJUSTMENTS FOR

Depreciation 12,62,90,664 12,21,93,836

Investments written off 9,99,999

Foreign Exchange Difference 32,68,478 1,24,29,969

Profit/Loss on Sale / conversion of Assets 2,12,274 8,91,722 4,60,74,962

Assets Written off 14,45,402 3,259

Interest (Net) 2,96,18,295 6,10,78,508

Dividend Received 2,67,405 -2,55,925

Preliminary Expenses Written off 28,616 28,616

Provision for dimunition in value of investments

of earlier years withdrawn -11,96,037

15,75,95,251 44,27,605 15,31,67,646 24,13,57,187

OPERATING PROFIT BEFORE 46,99,73,029 48,19,28,510

WORKING CAPITAL :

Trade and other Receivables 14,38,40,910 -2,55,87,695

Inventories 18,54,05,098 12,41,38,505

Trade Payables & Provision 7,08,11,125 2,77,82,710

7,08,11,125 32,92,46,008 -25,84,34,883 12,63,33,520

CASH GENERATED FROM OPERATIONS 21,15,38,146 35,55,94,990

Direct Taxes refunds received/ Paid 3,94,51,405 7,28,52,943 -3,34,01,538 -4,17,56,054

17,81,36,608 31,38,38,936

CASH FLOW BEFORE

EXTRAORDINARY ITEMS

Foreign Exchange Difference 32,68,478 -1,24,29,969

32,68,478 32,68,478 -1,24,29,969

NET CASH FROM OPERATING ACTIVITIES .. A 18,14,05,086 30,14,08,967

CASH FLOW FROM INVESTING ACTIVITIES

Purchase of Fixed Assets 8,26,71,455 -11,56,49,662

Capital Work-in-Progress 5,29,30,496 -44,77,102

Purchase of Investments 33,824 1,26,22,456

Sale of Fixed Assets 10,19,409 60,00,000

Sale of Investments 1,80,00,000 78,38,543

Interest Received 6,12,03,266 2,55,925

Dividend Received 2,67,405

Translation difference 0 70,54,870 3,42,10,193

Movement in Minority Interest 30,504 0 -2,04,56,186

8,05,20,584 14,26,90,645 -6,21,70,061 -7,96,55,833

NET CASH USED IN INVESTING ACTIVITIES ... B -6,21,70,061 -7,96,55,833

CASH FLOW FROM FINANCING ACTIVITIES

Repayment of Long Term Borrowings (Secured) 9,52,58,054 -25,09,59,415

Dividends Paid 3,86,76,348 -1,28,92,116

Tax on Distributed Profits 54,24,358 -16,51,802

Interest Paid 9,08,21,561 -6,89,17,051

Proceeds Long Term Borrowings (Unsecured) 1,53,44,999 14,94,07,000

C 9,52,58,054 15,02,67,266 -5,50,09,212 -18,50,13,384

NET CASH USED IN FINANCING ACTIVITIES ... C -5,50,09,212 -18,50,13,384

Net increase in cash and cash equivalents (A+B+C) 6,42,25,813 3,67,39,750

Opening Cash Balance 16,17,76,050 12,50,36,299

Closing Cash Balance 22,60,01,863 16,17,76,050

Annual Report 2006

SE

GM

EN

T R

EP

OR

T U

ND

ER

AC

CO

UN

TIN

G S

TA

ND

AR

D 1

7 A

S A

T 3

1S

T M

AR

CH

2006

Annexure

-IP

rim

ary

Seg

men

t R

ep

ort

-

Bu

sin

ess S

eg

men

ts

(Rs.

in lakhs)

Engin

eering

Cem

ent

Pow

er

Sugar

Oth

ers

Elim

ination

Consolid

ate

dP

AR

TIC

ULA

RS

Cu

rren

tP

revio

us

Cu

rren

tP

revio

us

Cu

rren

tP

revio

us

Cu

rren

tP

revio

us

Cu

rren

tP

revio

us

Cu

rren

tP

revio

us

Cu

rren

tP

revio

us

Year

Year

Year

Year

Year

Year

Year

Year

Year

Year

Year

Year

Year

Year

Revenue

Exte

rnal S

ale

s

and o

ther

incom

e11

484

8303

10918

9214

1021

06409

6046

324

446

2159

962

27997

23047

Inte

r S

egm

ent

Sale

s /

oth

er

Incom

e192

142

35

88

2793

98

336

761

287

235

1089

853

557

Tota

l R

evenue

11676

8445

10953

9302

1023

793

6507

6382

1085

733

2394

2051

28850

23604

Result

Segm

ent

Result

2249

1322

566

540

377

1359

1356

-173

-29

04067

3592

Add:

Unallo

cate

d C

orp

ora

te E

xpenses

-28

-497

Opera

ting P

rofit

/ (L

oss)

2249

1322

92

566

540

377

1359

1356

-173

-29

04039

3095

Less:I

nte

rest

Expenses

00

869

689

Add:

Inte

rest

Incom

eA

dd:

Incom

e T

ax R

efu

nd

57

0Less:

Incom

e T

axes

Net

Curr

ent

Tax lia

bili

ty829

530

Net

Defe

rred T

ax L

iabili

ty-2

3-3

1P

rofit

from

Ord

inary

Activitie

s2249

1322

92

566

540

377

1359

1356

-173

-29

2421

1907

less:

Min

ority

share

of

pro

fit

/ (

Loss )

286

305

Net

Pro

fit

2249

1322

92

566

540

377

1359

1356

-173

-29

00

2135

1602

Oth

er

Info

rmation

Segm

ent A

ssets

6346

5660

6294

4512

3561

3758

9319

9434

1347

1026

187

242

27055

24148

Unallo

cate

d c

orp

ora

te A

ssets

1414

2720

Tota

l Assets

6346

5660

6294

4512

3561

3758

9319

9434

1347

0187

242

28468

26868

Segm

ent

Lia

bili

ties

3572

3702

4043

2841

16

15

6237

7222

1281

680

4316

2414

10832

12046

Unallo

cate

d C

orp

ora

te lia

bili

ties

6092

4944

Min

ority

Inte

rest

1139

741

Share

hold

ers

Funds

10405

9137

Tota

l Lia

bili

ties

3572

3702

4043

2841

16

15

6237

7222

1281

5377

2414

28468

26868

Capita

l E

xpenditure

372

110

209

81

16

6123

154

45

805

765

1156

Unallo

cate

d c

apita

l expenditure

56

0Tota

l C

apita

l E

xpenditure

821

1156

Depre

cia

tion

52

44

172

158

263

263

709

723

33

34

31

01260

1222

Seco

nd

ary

Seg

men

t R

ep

ort

-

Geo

gra

ph

ical

Seg

men

ts

Sale

s R

evenue

Carr

ying a

mount

of

assets

Additio

ns t

o F

ixed A

ssets

Cu

rren

tP

revio

us

Cu

rren

tP

revio

us

Cu

rren

tP

revio

us

Year

Year

Year

Year

Year

Year

India

22343

17222

18775

17434

642

1002

South

East A

sia

- V

ietn

am

6507

6382

9319

9434

123

154

69

The KCP LimitedRegd. Office : 2, Dr. P.V. Cherian Crescent, Egmore, Chennai - 600 008.

PLEASE COMPLETE THIS ADMISSION SLIP AND HAND IT OVER AT THE ENTRANCE OF THE MEETING HALL.

NAME AND ADRESS NO. OF SHARES FOLIO NO./CLIENT ID NO.

65TH ANNUAL

GENERAL MEETING ON WEDNESDAY

27TH SEPTEMBER, 2006 AT 11.00 A.M.

AT REGISTERED OFFICE

“RAMAKRISHNA BUILDINGS”

2, DR. P. V. CHERIAN CRESCENT, EGMORE,

CHENNAI - 600 008.

* If you intend to appoint a Proxy, please complete the Proxy from below and deposit it at the Company’s Registered Office 48

hours before the meeting. Please ensure that the Proxy brings this Admission slip with him for the meeting.

Name of Proxy (If any) in block letters Signature of Member(s) / proxy

ADMISSION SLIP

PROXY FORM

---------------------------------------------------------------------------------------------------------------------------------------------�

The KCP LimitedRegd. Office : 2, Dr. P.V. Cherian Crescent, Egmore, Chennai - 600 008.

SERIAL NO. RECEIVED ON TIME CODE

I/We.........................................................................................................of............................................................................in the district of

................................................................................................... being a member/members of the above named company hereby appoint

.................................................................................................. of .................................................................................................. in the

district of ................................................................................................................................................................................... or failing him

........................................................................................................................................................................................... as my / our proxy to vote for me / us on my / our behalf at the 65th Annual General Meeting of Company to held on at 11.00 a.m. on Wednesday, the 27thSeptember, 2006 and at any adjournment thereof.

As witness my (our) hand(s) this ......................................................................................................... day of ....................................2006

Signed by the said ........................................................................................................................................................................................

* This Proxy form must be duly completed and received at the Company’s Registered Office 48 hours before the commencement of meeting.

Proxy need not be a member of the company.

No. of Shares Folio No./Client ID No.